Eliminating tax credits and deductions won’t solve budget problem

From NM Politics.net - By Paul J. Gessing • 1/11/11, - With a $400 million budget deficit facing lawmakers when they return to Santa Fe, the 100+ tax credits and deductions that the state offers have justifiably come under greater scrutiny. While we applaud the increased concern over New Mexico’s fiscal condition, there are a few important points to keep in mind. First and foremost, while the Tax and Revenue Department lists the film subsidy as a “tax credit,” this is a misnomer that can lead to poor policy decisions. The full spreadsheet of credits, exemptions and deductions is available on our website. The film “credit” provides a 25 percent rebate on each dollar the film industry spends in the state. In FY 2009, this amounted to a $76 million outlay, while in FY 2010, the total expenditure was approximately $66 million. This wealth transfer is inherently inefficient and should be considered for elimination. The rest of the tax credits and deductions involve people or businesses not paying taxes on activities that would otherwise have been taxed. From both an economic and moral perspective, the film subsidy is far different than a credit or deduction. Transferring money from one taxpayer to another is far different than simply allowing a taxpayer to hold onto his or her own money. Read more

Eliminating tax credits and deductions won’t solve budget problem