Commentary: Amid New Mexico's boom in oil tax revenues, legislators have contemplated ways to put these surplus funds to work for the Land of Enchantment. During the last session the Legislature grew spending by 11%. They raised taxes, doubled the State’s film subsidy program, and created an outdoor division, among many big-spending ideas. When taken together the 2019 session resulted in a massive expansion of government.
What our State really needs is not more government spending. Instead it needs policies that foster entrepreneurship. What legislators need to do is promote laissez faire, free market policies that allow business to thrive and make our State more attractive to companies and residents and therefore more prosperous.
Jeff Mitchell, of the Bureau of Business and Economic Research at the University of New Mexico, points out that “since the end of the [Great] recession, New Mexico has ranked 48th nationally in the growth of business and professional jobs and 45th in the growth of financial services jobs.” A large financial and entrepreneurial sector is crucial for sustained economic development and growth. Since New Mexico lags severely in both, this profoundly affects our state’s vitality. Yet, nothing in the 2019 session directly addressed these important areas.
Many independent sources rank New Mexico as one of the lowest in the nation for economic freedom and entrepreneurship. The Canadian Fraser Institute, in their annual Economic Freedom of North America report, assessed the economic freedom of metropolitan areas around the U.S. and found a positive correlation between economic freedom and metropolitan prosperity. They assert that “metropolitan areas [and states] with higher economic freedom tend to have higher per capita incomes and faster population growth.” Not to mention lower crime rates, lower unemployment, higher educational attainment, better roads and hospitals and other public goods.
Economic freedom is measured by analyzing government spending, government tax revenue, and employment in government jobs as a percentage of total state employment, all of which translate to the tax burden placed on citizens and businesses, and all of which are debilitatingly high in New Mexico. Fraser's report ranks New Mexico in the fourth quartile (least free) among States with respect to economic freedom, unlike our prosperous neighbors of Arizona, Colorado, and Texas, all in the first quartile as the most free. Again, what was done by the Legislature in 2019 to promote economic freedom? Nothing at all.
A 2017 policy brief from the local Rio Grande Foundation similarly reports that government spending, Gross Receipts Tax rates, and the ratio of government sector to private sector employment is excessive in New Mexico. Even USA Today ranks New Mexico third in the country with the highest percentage of its workforce employed in the government sector at 22.5%. Furthermore, all of these government entities are our state's largest employers and provide our highest-paying jobs. The Legislature in 2019 piled even more spending and government bureaucracy on top of what existed.
Since New Mexico is also the most reliant state on federal dollars, our economy is at the mercy of Washington DC, the decisions of whom would make OUR state's economy among the first to suffer should DC decide to “shut down” or cut us off. This translates to the dire need for us to slash business and property taxes (which actually CAN boost tax revenue) to let our business sector grow and make New Mexico more self-reliant and less dependent on Uncle Sam. Since our economy consists primarily of government entities (Public Schools, State Colleges and Universities, National Labs, and Military bases), we have plenty of work to do.
There are ways in which New Mexico is great for young people like me. We have a booming craft beer industry, unique culture and cuisine, music festivals, and relatively affordable housing. However, amenities and government jobs fueled by oil production are not enough. The ease of business enterprise is key to the prosperity that New Mexico has historically lacked.
Raúl Montaño Ayala is a recent graduate of the University of New Mexico and a policy scholar with New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.