Inside the Capitol

Monday, February 01, 2010

2-3 Tax Cuts and Increases Can Be Temporary

Syndicated Columnist

SANTA FE -- On opening day of the 2010 Legislature, former Gov. Gary Johnson carried a sign outside the state Capitol saying "No such thing as a temporary tax."
It has become a trendy saying among Republicans and conservative Democrats this session. House Majority Whip Keith Gardner, of Roswell, went one better by declaring "There's nothing more permanent than a temporary tax increase."
It's a take off on a popular remark after World War II about military barracks buildings that local communities decided to keep around "temporarily."
But there are such things as temporary tax increases. Gov. Bill Richardson likes to brag that he has eliminated a billion dollars in taxes since the beginning of his administration. That made the former tax increases temporary taxes.
Back in 2003, when most of that $1 billion of taxes were cut, some Democrats wanted to make the cuts temporary. But euphoria about having a governor who already was off wooing big international companies to relocate in New Mexico prevented that handful of Democrats from inserting what they called a circuit breaker in the tax cut bills.
The circuit breakers would have reinstated the taxes when New Mexico ever faced another deficit. Back then we were riding high and Richardson promised the tax cuts would attract enough businesses with high-paid employees to more than make up for the tax cuts.
It didn't happen. And now we're really in a mess. The governor, all Republicans and conservative Democrats are insisting that those tax cuts, made during the good times, must remain permanent even though they would solve our present situation.
Both tax cuts and tax increases can be temporary. Many of the same lawmakers who insist all tax increases are sure to become permanent also love to put sunset clauses on any legislation they don't like.
So all tax increase legislation passed by this Legislature could contain a sunset clause directing that as soon as the state ends a year with surplus revenue, that tax increase would disappear.
Why is Gov. Richardson insisting that his billion dollars of tax cuts become permanent, at least for the rest of his administration. It is to protect his tax-cutting legacy. And his traditional enemies are helping him do it.
One way to create a stable tax structure, which doesn't have frequent hikes and cuts, is to establish a special fund into which surpluses would be placed every year that the states ends up in the black. There wouldn't be any piddling rebates to every taxpayer. That money would go into a special fund to be used in deficit years.
It would truly be a rainy day fund that would be triggered automatically depending on whether the state ends up with a surplus or a deficit.
It sounds good but the likely tendency would be to spend all the money rather than tuck it away for a rainy day. Americans aren't good at saving. But we also have lawmakers who like to assure that money isn't just tucked away. They want it locked away.
Back during a previous energy boom, from 1974 to 1982, the Severance Tax Fund was created for just the purpose I have mentioned. But after a few years, lawmakers decided to lock it up much like our state's Land Grant Permanent Fund.
Maybe we should try again -- if we ever see another state surplus. The hole at the end of the tunnel hasn't appeared yet but experience tells us it always does. Although when we get to that point, we always seem to discover new needs the state should address.
Deficit years give us an opportunity to decide whether the new programs we decided were so important really are that necessary. It wouldn't be a bad idea to go back and look at a state budget from 50 or 60 years ago and see what government services we thought we could live with then.
WED, 2-03-10

JAY MILLER, 3 La Tusa, Santa Fe, NM 87505
(ph) 982-2723, (fax) 984-0982, (e-mail)



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