Complement Higher Taxes with Increased Energy Costs

Are you feeling the economic pinch? Well, when the dust settles from the current legislative session, that pinch is likely to feel more like a bone-shattering squeeze. We've got tax after tax after tax being proposed and pushed through, and that's only the beginning. 

There are other initiatives out there which will be equally successful at separating you from your hard earned dollars:

The greenhouse gas reduction sought by the advocacy group New Energy Economy would apply to oil and gas producers, refineries, manufacturers, coal-fired power plants and others in New Mexico that emit 10,000 tons or more a year of carbon dioxide.

Public Service Company of New Mexico estimates it would have to reduce current carbon emissions from its fleet of power plants by 36 percent to meet the proposed cap.

And the company says that would mean a big jump in electric bills.

In fact, if you follow the money trail, you'll see that big government lobbyists are behind all of the major wine and dining going on right now in Santa Fe:

However, the latest batch of lobbyist reports that trickled into the Secretary of State's Office last week showed that the lobbyists who were throwing the biggest parties for the senators and representatives were not from commercial interests. Instead, they represented state employees, community colleges and an environmentalist group. 

As legislators continue to take on the role of the Sheriff of Nottingham, they would be wise to take note of recent elections around the country. Continuously trying to take more from those making less inevitably has consequences.

Wall Street Versus Main Street Continues

I've wondered aloud on more than one occasion why the vast majority of stimulus efforts on the federal level were given to Wall Street versus Main Street. Of course, we all know the reason.  Democrats are providing special favors to their favorite campaign donors and making sure that big inefficient businesses with powerful unions can keep their doors open regardless of the lack of demand for their product.

Well, as near as I can tell, the same thing is happening in the New Mexico legislature - the interests of large business at the expense of small business. Only instead of giveaways of taxpayer money, we're talking about who the Democrats in the legislature are opting to tax.  Mind you, I say Democrats because the Republicans have made it clear that reining in the size of government should happen before increasing taxes:

Republicans in both the House and Senate are expected to take a hard-line approach against tax hikes, although they bristle at suggestions they're merely trying to block the Democratic agenda.
    
"They've never asked us to be part of the solution," said Rep. Jimmie Hall, R-Albuquerque.
    
Hall said he thinks there are still ways to trim the budget — by targeting administrative and vacant positions — without hurting core services.
    
"I can't support any tax increases until we shrink state government down to a level that a populist can support," he said. 

So, back to the tax, tax, tax enamored House Democrats. Let's take a look at their proposed solution:

Gov. Bill Richardson said Wednesday he supports the House's budget approach, which includes temporarily raising the gross receipts tax rate and imposing a personal income surtax on high-earning New Mexicans. 

I've explained in a previous post that what is really being proposed is a tax increase on the profitable retained earnings of remaining small businesses.  In other words, the money they need to weather the storm and keep key employees at work is the target of the tax increase. Now, yes, I'm of the mind that significant spending cuts should be made before even considering any tax increase, but I can't help but wonder if the Democrats are so bent on raising taxes, why they are targeting small New Mexico businesses instead of large Wall Street firms.


Think about it.  The general consensus is that small, not large businesses are the key to a true economic recovery. The irresponsible stimulus spending may have helped keep the doors open of those who are "too big to fail," but it did nothing to keep your neighbors, family and friends employed:

Unemployment rates were higher in December than a year earlier in 371 of the 372 metropolitan areas and lower in 1 area, the U.S. Bureau of Labor Statistics reported today. 

President Obama is finally awakening to the fact that America (and his popularity) is hurting because he has put the interests of Wall Street and unions before that of Main Street families:

Faced with a national 10 percent unemployment rate and a corresponding erosion in his popularity, President Obama delivered his first State of the Union address tonight and offered up a laundry list of proposals aimed directly at the small businesses who do 60 percent of the hiring in America.

So, you've got to wonder why House Democrats in the legislature have targeted small businesses and left big businesses alone. Sure some big business tax bills were introduced, but bills like HB 62, which would could raise taxes on large out of state corporations, got a pass in favor of taking more money away from job creating small New Mexico businesses.

Come Election Day 2010 the House Democrats, all of whom are up for re-election, are going to find that it is the Main Street business owners, employees and their families that are going to vote.  You know, the ones that actually live in the state.

Before You Raise Our Taxes

Legislators who are interested in continuing to serve past November 2010 would be wise to consider cleaning up the mess that is state government before further increasing our taxes. A good place to start might be with the people put on the government payroll that do little more than collect a check:

One of them is Charles Lipski Sr., who was hired at the Department of Transportation two months before the freeze, at $65K a year, with a resume that had his last job ending in 1994. He was given a state job that had no title and no description. Lucky for Lipski and others like him that these temp jobs don't have to be advertised to the public.
        
Getting that information wasn't easy — NMDOT tried to make a reporter go to Santa Fe to "sign in" to see Lipski in Bernalillo. Asked about what he did, Lipski would only say he was very "excited" about doing a job on the public payroll that he couldn't talk about publicly. 

You see, when the House Revenue and Taxation Committee votes today on passing a 1% tax increase on Main Street small business owners throughout the state (see this post), they will be removing $44 million from the economy that could be used to save or create real jobs in order to continue do nothing patronage jobs as noted above:

Consideration of a bill that would impose a 1 percent surtax on the taxable income of high-earning New Mexicans was delayed Friday by a House committee.
        
However, Rep. Edward Sandoval, D-Albuquerque, the chairman of the House Revenue and Taxation Committee, said House Bill 9 will be debated by the committee on Monday.
        
If enacted, the measure would generate an estimated $44 million in the coming year.  

When you consider that we're still losing jobs, now is not the time to force higher taxes on small businesses throughout the state that are trying their hardest to help rebuild the economy:

New Mexico’s seasonally adjusted unemployment rate was 8.3 percent in December 2009, a sharp increase from 7.8 percent in November and 4.7 percent a year ago. The national unemployment rate stayed at 10.0 percent.

The rate of over-the-year job growth, comparing December 2009 with December 2008, was negative 3.1 percent, representing a loss of 25,900 jobs. New Mexico’s ranking among the states was twenty-eighth highest at a time when all 50 states reported declining year-over-year employment.

December was not a good month for employment in New Mexico, with the seasonally adjusted series showing a decline of 4,800 jobs. This may be an indication of reduced seasonal hiring, compared to what is normal. However, we still believe that we are several months into a slow recovery. There are typically a number of setbacks in any recovery, as we take two steps forward and one step back. December appears to one of those steps back.

A tax increase on top of all of the other economic pressures would be yet another step back. There are an awful lot of qualified New Mexicans who are out of work because of the downturn in the economy, and they're not going to take kindly to being kept out of work because our elected officials refuse to supress job creation so that they can keep dole out political favors at taxpayer expense.

It's Called Permanent for a Reason

New Mexico has something called a Permanent Fund.  It is money socked away in recognition of the fact that one day the oil and gas resources that fill our state coffers will be no more. It might be worth visiting Merriam-Webster's definition of the word permanent:

Main Entry: ¹per·ma·nent

Pronunciation: \-nənt\

Function: adjective

Etymology: Middle English, from Anglo-French parmanant, from Latin permanent-, permanens, present participle of permanēre to endure, from per- throughout + manēre to remain — more at per-, mansion

Date: 15th century

: continuing or enduring without fundamental or marked change : stable

synonyms see lasting

— per·ma·nent·ly adverb

— per·ma·nent·ness noun

Now that we understand the word "permanent,"  I think we can all agree that there isn't any circumstance in which "Permanent Fund" could be misinterpreted to mean "Rainy Day Fund:"

A type of contingency fund in which money is set aside to be drawn upon in case of a future budget deficit. It is often referred to as a budget stabilization fund.

Yet, that is precisely the type of convenient rewriting of the English language one legislator is promoting:

A leading state Senate Democrat says it's time to borrow against New Mexico's rainy day funds for a $500 million loan — a gamble he says would make it unnecessary for lawmakers to approve major tax hikes and cut the salaries of state workers this year.
    
Under the terms of a bill introduced by Senate Majority Leader Michael Sanchez, D-Belen, up to $500 million could be moved into the state's general fund by directing the state's Board of Finance to issue short-term revenue bonds.
    
The bonds would be paid off over five years via a special fund created for that purpose, Sanchez said, with the money coming from general fund appropriations and a portion of the state's gross receipts tax revenues.    

Sanchez acknowledged that the bill (SB184) hinges on a wager that the state's economy will improve in the next few years.

You might consider sending the good Senator from Belen an email letting him know that we, the taxpayers and our children and grandchildren, prefer that he keep his wagering to recreational pursuits done with his own money on his own time at any one of the fine tribally owned casinos found throughout the Land of Enchantment.

Only One Committee Referral

You can tell a lot about the future of a bill introduced in a legislative session by the number of committees it is referred to before it sees the light of day on the floor for a vote. If a bill has three committee referrals, you can expect it's got a long uphill battle that will see the session end before the bill makes it to the the floor. When it comes to tax raising legislation, that is what those of us prefer to spend our own money want to see.

On the other hand, if a bill has only one committee referral, then it's pretty clear that someone with power wants to see it passed.  Last week, we noted that HB 9 INCOME TAX SURTAX bill, had quickly collected a lot of signatures by those who believe in taxing more before spending less. Now, we observe that it has only one committee referral.  If you find yourself in the group that currently pays 59% of the state's income tax revenue, and you don't want to pay even more, you better start lighting up those phone lines and filling those inboxes.


 

It Only Took Three Days

So, who wants to raise our taxes? If you're a legislator in Santa Fe eager to raise taxes on small businesses in New Mexico, raise your hand.  No, better yet, just scribble your name on top of the proposed new tax bill.

Oh, sure I understand how some readers might think that this is a tax on the rich, but that's because they don't understand how most small businesses are set up.  They are usually limited liability companies or sub chapter S corporations.  That means that the profit from their company ends up on their personal income tax filings.

Now with banks being tight on lending (despite bailouts from taxpayers), most profitable small businesses are keeping those retained earnings in their company to keep their doors open and hold onto their key employees. But, that last lifeline is about to be raided by legislators and the administration in Santa Fe because it's easier to force more layoffs in the private sector than to cut unnecessary spending in public sector.

After all, who is going to notice if one more small business is forced to close their doors? Well, the answer is I will, and I sure hope you feel the same.  If you find your legislator's signature on this additional tax on small business, I hope you'll give them a call and ask them to get their priorities straight. If you don't know what your legislator's signature looks like, no problem, you can download this PDF of the entire bill along with the document they signed to kick off the session.

What's Important to Voters

On the national level, elected Democrats just received a wake-up call that their agenda is not our agenda. And, by our, I mean the majority of voting Americans whose number one concern is housing and feeding their families:

Shorn by Massachusetts voters of their pivotal 60th Senate vote and much of their political momentum, the White House and congressional leaders are considering a more modest version of Obama's top legislative priority. It could focus on curbing insurance company practices like denying coverage to sick people and on helping low-earning people and small businesses afford coverage, officials said.

Also fueling the Democratic search for a fresh health care strategy is a conviction by many in the party that it's time for an election-year focus on jobs and the economy, which polls show are easily the public's top concerns.

Of course, they're kind of missing the mark. Jobs and the economy are NOT an election-year focus.  They are an EVERY year focus.  Think about it. If we have a strong economy and jobs, the vast majority of Americans can take care of meeting their own healthcare needs.  I know.  What a concept!

I'll also let you in on a little secret. The more government taxes and regulates, the less likely we're going to see jobs and a strong economy. The bigger government gets, the smaller the private sector gets. 

Don't believe me? Well, look for a state with a really big government footprint. A state like, hmm, well, a state like New Mexico. We've got lots of big government and very little industry.  The result? We've got a very poor populations per capita.  Are we seeing how this works?

Our state legislators would be wise to consider this as they wrangle with how to save all of those "very important" government programs. If we want to see jobs and growth, we need to shrink the size of government.  Of course, the easiest way to do that is stop feeding the beast.  In other words, make do with the revenue we have as opposed to taking away more jobs by increasing taxes even more.