Addressing the Roswell Rotary Club at Best Western Sally Port Inn, Rio Grande Foundation President Paul Gessing said Thursday New Mexico’s reliance on the federal government stunts the state’s economic growth.
Based in Albuquerque, the foundation is a nonpartisan, nonprofit research institute that focuses on issues such as limited government, economic development and education reform.
A September Census Bureau report found New Mexico had a 22.2 percent poverty rate, the highest in the nation. While most other states have seen positive job growth, New Mexico has lagged behind, ranking 49th in nonfarm employment. Gessing said the state’s downward economic spiral is due to its “unique reliance on Washington,” from federal lands to military bases.
For the state to prosper, he said it must embrace the idea of economic freedom, where “individuals are free to secure and protect his or her human resources, labor and private property.”
One way to achieve this is through right-to-work laws, which allow employees to work without having to join a union. Gessing said New Mexico had considered adopting right-to-work laws in 1980 and if it had, by 2011, employment, personal income and wage and salary income would have all been 21 percent higher. If the state enacted right-to-work legislation this year, he said there would have been a permanent boost in employment and income.
The state also should consider eliminating the personal income tax, he said. Research from Ohio University found that from 1998 to 2007, more than 1,100 people every day moved from the high income-tax states, such as California and New Jersey, to states with no income tax, such as Florida and Texas.
“People move where they don’t have their money taken from them,” Gessing said.
The 2013 legislative session did “nothing significant” on economic issues, he said and the last-minute tax deal was more of a political incentive than economic one. He criticized the state budget’s plan to phase out “hold harmless” agreements to local governments over a 15-year period.
Under the agreement, the state provided money to local governments after the repeal of gross receipts taxes on items, such as food and medicine. To offset the loss, the budget gives local governments the option to impose a 3/8 percent tax.
Rotary member and City Councilor Steve Henderson said ending the agreement could cost the city millions of dollars each year.
“It’s really disappointing that the New Mexico Legislature would develop a tax policy in such short order,” Henderson said. “Legislators chose to put this on the backs of cities and towns and we have to figure out how to solve that problem.”
The one bright spot in New Mexico’s economic picture, Gessing said, was the prospect of the Obama administration allowing natural gas exports to Europe and Asia, which would benefit the state greatly. He encouraged residents to express their support for exports to lawmakers.
“New Mexico can’t get ahead by standing in the same spot,” he said.