A special session of the New Mexico legislature closed on November 5 after rejecting a hike in the state’s gasoline tax but approving a 3 cents per gallon increase in the diesel fuel tax.
The session was convened by Governor Bill Richardson on October 27 to consider a proposal made earlier that month by a blue ribbon tax reform commission. The 23-member commission called for cutting income taxes for low- and middle-income New Mexicans, making income tax rates more progressive, cutting taxes on medical services, and cutting business taxes.
To offset the revenue losses, the commission recommended raising fees and other taxes, including the motor vehicle excise tax, gasoline tax, and vehicle registration fees.
If fully implemented, experts projected, the commission’s recommendations would have resulted in $135 million in tax increases. “No one, including Democrats, wants to run on a record of having voted for a tax increase,” noted State Rep. Ted Hobbs (R-Albuquerque).
According to the Governor’s office, “The vast majority of revenues in the [special session] bill come from those who use the road the most–trucks. And 75 to 80 percent of the trucks using our highways are not based here.” The bill also increased yearly motor vehicle registration fees for residents by $12.50 per year when fully implemented.
High Gas Prices Already
Gasoline prices reached record levels in parts of New Mexico over the Labor Day weekend, and Richardson responded with public pronouncements against raising the state’s gasoline tax. “A spike in fuel prices has caused tighter family budgets,” Richardson told the Associated Press on September 1. “After talking to many New Mexico taxpayers and looking at the soaring prices of gasoline and looking at just so many burdens on families, I’m not going to add to them,” he said.
If the blue ribbon commission’s recommendations had been implemented, the state’s gasoline tax would have risen from the current 17 cents a gallon to 22 cents by 2008. Taxes on other fuels, including diesel, would have risen from 18 cents a gallon to 24 cents a gallon during the same period.
A similar proposal to increase the gasoline tax by 5.4 cents a gallon died during the legislature’s regular 2003 session. Richardson had opposed that measure as well.
A commission sub-committee chairman said his panel recommended increasing the gasoline tax after deciding “roads need more money.” But Richardson countered, “Just about everyone is upset by the high gasoline prices.”
Spending Cuts Next Up
With a new legislative session just around the corner, the Governor’s office is bracing the legislature for possible spending cuts. According to David Harris, Richardson’s chief economic advisor, “We’re going to make an effort to reduce the budget, to bring it down to size.”
Hobbs was pleased by that plan. “We keep talking about what we’ve done with taxes, and I didn’t see anyone talking about dealing with the budget. I’m pleased to hear what was said because that’s a part of the equation that gets overlooked.
“You can’t get total tax reform in a three or four-month period,” commented Hobbs, noting the blue-ribbon commission met only part-time from June through September. “No reform came out of the commission.”
M. Gene Aldridge, president of the New Mexico Independence Research Institute, agreed.
“The difficulty with most … tax reform is that it is piecemeal and patchwork at best. It does not adjust the taxation policies to a good plan for economic development. The recent Blue Ribbon Committee on taxes once again did not solve problems–it just looped in small adjustments and in most cases proposed raising taxes.
“Good economic development policy means finding ways to cut government spending so that the taxes are not needed in the first place,” said Aldridge. “Limited government must be the guiding principle.”
John Skorburg is managing editor of Budget & Tax News. His email address is [email protected].