New Mexico needs jobs. The state has lost roughly 40,000 jobs over the past five years; last year, even as the rest of the country recovered, New Mexico lost another 4,800 jobs.
While “creating jobs” was a familiar refrain on the campaign trail, little has emerged in the way of a comprehensive jobs plan. What have surfaced are piecemeal approaches to jumpstarting New Mexico’s economy, from changing its tax structure to improving its struggling schools.
Last week, Gov. Susana Martinez announced an economic development proposal that includes gradually reducing the corporate tax rate from 7.6 percent to 4.9 percent.
Martinez’ proposal echoes aspects of the New Century Economy Jobs Agenda, which New Mexico Economic Development Department Secretary Jon Barela and state Sen. George Munoz, D-McKinley, introduced last fall. They claim their plan, which also includes investing money in infrastructure and job-training programs, could create up to 8,000 new jobs by 2017.
But state Sen. Peter Wirth, D-Santa Fe, says lowering the corporate tax rate is only one part of what should be a multi-pronged approach that includes combined reporting—the requirement that large, multi-state corporations file New Mexico taxes based on their entire income. (The Legislature passed a version of Wirth’s bill last year, but Martinez vetoed it.)
Without combined reporting, Wirth writes in an email to SFR, “multi-state corporations will continue to create New Mexico subsidiaries and ‘expense’ New Mexico profits out-of-state avoiding their fair share of our corporate tax. Why pay 4.9% if you can pay nothing?”
Paul Gessing, the president of the conservative Rio Grande Foundation, says both approaches deserve consideration.
“I think a straight effort to cut the rate is going to have—it’s going to be tough sliding,” Gessing says. “It could certainly happen. But if [combined reporting is] the compromise that needs to happen, then I think that’s something the policymakers should look very closely at.”
But corporate taxes are only one aspect of the jobs challenge.
“The governor’s package is entirely focused on corporations and recruiting corporations,” says state Sen. Tim Keller, D-Bernalillo. “What we’re going to try to do is basically find a way to help small businesses and companies already in New Mexico, as well.”
Keller proposes spending five years assessing every single tax break, exemption and credit in order to determine which ones actually bring a return on the state’s investment, and which ones don’t. He supports using some of the state’s reserves to fund capital outlay, or infrastructure projects, which he says will pump $300 million into the local economy. He’s also pre-filed a package of bills addressing “technology transfer”—an idea freshman state Rep. Stephanie Garcia Richard, D-Los Alamos, is also planning to tackle by incentivizing training for skilled labor.
“Being a schoolteacher…number one, I see a need for a skilled workforce,” Garcia Richard says, “but then on the other hand, I think it’s exciting that we’re able to offer it—to try to draw industry in to be interested in training.”
Given its close relationship to economic development, education reform will also be at the top of many lawmakers’ lists this session.
“The big question is whether or not we’re going to keep trying these little tweaks, and middling-like legislative ideas for education, that have to do with test scores and things of that nature,” Keller says. “Or are we going to make some big moves that are going to actually move us out of the basement of America, in terms of education?”
In light of the state’s dismal job numbers, Gessing says, both legislators and the governor should take action.
“In a lot of states, you would see people marching in the streets, and the governor would be out giving press conferences every single day, and would be saying, ‘This is unacceptable; we need to change now; and I’m going to use the bully pulpit to shame legislators into changing their ways,’” he says. “I think we need to have more aggressive leadership—whether that comes from the governor or even some legislators.”