Brian McDonald

Lee Reynis

Jim Peach

Chuck Wellborn


The State’s tax system has a major structural problem and it relates to the gross receipts tax.

New Mexico enacted an Emergency School Tax in 1935 to fund public schools with a state-level sales tax. In most states, public education is funded with local property taxes but in 1935 a statewide sales tax was chosen because it was the only tax capable of raising the revenue required.

Later, New Mexico instituted a public school funding formula to deal with the inequalities in public school funding capacity across the State. Together, these actions firmly fixed the responsibility for funding public schools on the State’s General Fund.

The revenues from the sales tax (which later became the gross receipts tax) are not dedicated to public schools. So the schools, along with the State’s higher education system, are forced to compete for funding with a myriad of state spending needs, plus appropriations dictated by political agendas.

Before the 1935 school tax, public schools had been funded from local property taxes. Once property values recovered from the Depression, New Mexico could have changed course and used the State’s unused property tax authority (10 mils or so) to provide a stable source of public school funding long term.  Instead, this taxing authority was given away permanently to counties and municipalities.

So, unlike other states which primarily fund their public schools from local property taxes, New Mexico’s schools get the lion’s share of their operational funding from the State’s General Fund.  Public schools have no operational revenue source of their own. The only contribution that local property tax revenues make toward public school operations is the 0.5 mill levy each district is required to impose. However, the State’s school funding formula takes credit for much of this property tax revenue and essentially neutralizes it as an additional local revenue source for schools.

Until recently, local property taxes were the only source of funding for school capital projects. But in the last decade, state funding of school capital needs has become a more pressing need. These needs have been addressed utilizing severance tax revenue bonds and general fund surpluses. In contrast to other states, local property taxes in New Mexico remain largely untapped except to repay General Obligation bonds approved by the voters.

Is New Mexico’s gross receipts tax really the oddity it is said to be? Yes, it is: in two ways.

The first is that it is a very broad tax, even covering services. Does that mean it is bad? Not necessarily, because this broad coverage of the gross receipts tax brings in sufficient revenue that it allows property taxes to be extraordinarily low compared to other states.

The second unique feature of the gross receipts tax is not so good. That is that services are often taxed in business-to-business transactions with the result that more than one tax is paid on the ultimate product or service. More needs to be done to avoid that.

It should also be noted that the gross receipts tax is a regressive tax. As a percentage of household income, it imposes a greater burden on the poor than the rich because of the lesser ability of the poor to pay the tax.

Previously, this regressivity was offset to a greater degree by New Mexico’s progressive income tax. But when income tax rates were lowered from 8.2% to 4.9% during the Richardson administration, much of the progressivity of the income tax was lost. Now the top marginal rate of income tax kicks in at the relatively low level of $24,000 in taxable income for couples. Such a couple now pays the same marginal rate of tax as those with taxable income that is 2, 5, or even 10 times higher.


The reductions in personal income tax rates during the Richardson administration, coupled with corporate income tax reductions during the Martinez administration, have had the effect of placing more and more of the burden for funding state government operations on the gross receipts tax and, until recently, the volatile taxes on the oil and gas industry.

At the same time, revenues from gross receipts tax have gone down in recent years even though gross receipts tax rates have risen. The reason is the once broad base of the gross receipts tax has been whittled away.  Most regrettable were the food, prescription drug and medical deductions from gross receipts tax passed under the Richardson administration. Just these exclusions currently reduce the State’s revenues by hundreds of millions of dollars each year.

Despite this revenue loss, each legislative session sees dozens of bills introduced and often passed to carve out more and more exclusions from the gross receipts tax. Worse, these tax exclusion measures typically have no sunset provision offering the Legislature the opportunity to end them if the intended benefits are not being realized. As a result, many such gross receipts tax exclusions on the books serve no current benefit to the State. Further, cities and counties impose gross receipts taxes themselves and so these exclusions from gross receipts tax at the state level have caused cities and counties serious declines in tax revenues. As a consequence, many have raised their gross receipts tax rates to make up for the decline.


The choices are obvious: eliminate most of the gross receipts tax deductions, exemptions and credits and reduce the gross receipts tax rate sufficiently that its adoption becomes sufficiently politically appealing to overcome the complaints about the elimination of all the sacred cows. In addition, there should be at least some reduction in tax pyramiding in fairness to industries impacted by this now and to improve its chances for adoption. Consideration could be given to adding another income tax bracket for high earners as a means of replacing some of the lost gross receipts tax revenue and adding a little more progressivity to the income tax.


At this point, some discussion of state and local tax burdens is appropriate.

Most New Mexicans don’t realize that overall state and local tax burdens vary less from state to state than it might seem. The measurement of a state’s tax burden is complex and requires careful analysis. Each state has its own mix of taxes such as sales, income, property taxes, and others. As noted above, New Mexico funds public education with state-level taxes, whereas in other states local government property taxes are used to fund public schools.

A credible tax burden analysis must consider both state and local taxes. Comparing only state-level taxes is a common tactic by those advocating lower taxes. In a recent presentation at the New Mexico Tax Research Institute’s Annual Conference, DFA Secretary Tom Clifford indicated that the state and local tax burden in New Mexico as a percentage of personal income is slightly below the national average. That aligns with the general nonpartisan opinion. Even then, New Mexico’s state-level taxes include severance taxes on minerals and oil and gas extraction and are always included in the tax burden analyses. But few New Mexico consumers pay these severance taxes and that favorably improves the overall tax burden in New Mexico. The mantra that New Mexico taxes overall are too high is a myth.

The varying mixes of taxes from state to state account for the complaints that a certain tax in another state is lower than a similar tax in New Mexico. But when all of the taxes imposed by that state are taken into consideration, it becomes clear that there are no free lunches.


Employment levels in the State are still not yet back to the levels achieved in 2007 before the Great Recession. New Mexico has been hit hard by the federal sequestration, the bust in construction activity and now the decline in energy prices. Despite claims that recent job gains signal economic recovery, these new jobs continue to be largely healthcare jobs and are due, not to the State economic development initiatives but to enactment of the federal Affordable Care Act and the resulting increase in medical care for State residents. Albuquerque Business First reported on April 29th that though the South and West offer the best climates for small-business growth, Albuquerque ranks 93rd in business vitality out of 106 metro areas with a population of at least 500,000.

A three-step course of action is recommended.

First, fix the gross receipts tax as described above. Retain the gross receipts tax breaks that make a demonstrated contribution to our economic development efforts. But also do this overhaul in a way that will raise gross receipts tax revenues modestly so that New Mexico has the resources to invest in its future. And don’t let anyone tell you that a modest tax increase will kill our chances to attract new business activity to New Mexico.

Second, make a periodic review and refinement of the existing inducements that the State offers to job creators, including tax breaks, subsidies for job training and infrastructure, and their effectiveness.

Third, rather than relying solely on these job creation inducements, the State should implement strong measures to stimulate the State’s economy, including meaningful fiscal stimulus.

As just some examples, the State could use increased tax revenues, capital outlay money and severance tax and general obligation bonds to pay for state infrastructure projects that will materially improve the long term health of the State’s economy: roads, airports, internet connections, innovation districts, university science and engineering laboratories, tenured faculty positions, plus equipment and facilities for public schools and other improvements to New Mexico’s education system that enhance educational and training opportunities for the State’s young people.

Good examples of this type of action are recent efforts by the City of Albuquerque. It recently built the new interchange at Paseo del Norte and I-25, not by waiting for federal spending to someday arrive, but instead by largely using City bond money to pay for it. The work created many construction jobs and improved the commuting life of citizens.

The City is doing much the same thing with its Albuquerque Rapid Transit project (except that the federal government is providing tens of millions in funding). Similarly, the City, County and UNM are funding development at the Innovate ABQ project on Broadway and Central.

There will always be those who complain that the City or State is doing too little to address important challenges and then find fault with whatever action is taken. Yes, some will worry that improving roadways will lead to urban sprawl or more cars on the road. Some will not believe that the bus rapid transit will lead to increased investment in properties along Central Ave. Others will not be convinced that an innovation district will be a meaningful job creator.

But isn’t decisive but thoughtful action better than doing nothing but wringing our hands over the State’s and City’s uncertain economic future?


There always seem to be a fair number of misstatements about New Mexico’s tax system, including a few recently, and this might be a good time to review them.

Claim: The Rio Grande Foundation claimed (Op-ed Paul Gessing April 10, 2016) that New Mexico’s tax burden as a percent of personal income is ninth-heaviest in the nation, citing Federation of Tax Administrators data.

Analysis: Wrong. The Rio Grande Foundation compared only taxes levied at the state level. New Mexico funds public education with state-level taxes. Other states fund public schools with local government taxes and so the Foundation is comparing apples and oranges.

Because it utilizes state-level taxes, almost half of New Mexico’s annual state budget is devoted to its public elementary and secondary schools. So comparing New Mexico’s state-level taxes to the state-level taxes of states that fund education with local property taxes simply makes no sense.

In addition, New Mexico’s state-level taxes include a substantial amount of severance taxes that most other states do not receive. Severance taxes are paid by mining and oil and gas companies (typically out of state), not individual taxpayers. This further distorts this comparison of state-level taxes.

It might be noted that the Federation of Tax Administrators specifically warns readers not to use its comparative data to judge whether a state is a high tax or low tax state because “no single measure generally tells the whole story.”

Claim: The Rio Grande Foundation claimed in the same Op-Ed that New Mexico state and local workers make 20 percent more than their private sector counterparts if retirement and other benefits are included. It cited data from a website called “Key Policy Data”. The disparity between public and private workers is claimed to be the 12th highest in the country.

Analysis: Wrong. State and local government employees appear to be overpaid because the comparison ignored entirely the compensation of the thousands of federal employees (military, federal agencies, national labs) who reside in the State.

Again, the large federal New Mexico presence means the proportion of private sector employees is smaller than in other states.

It is true, however, that retirement benefits for state and local government employees are substantial if an employee stays in the job long enough to earn them. But many do not and therefore it shouldn’t be assumed that all government workers will receive government retirement benefits. It is a long-standing practice for government employees to be offered good retirement benefits as an inducement to remain in government service.

The measurement Key Policy Data made of the compensation of state and local government employees is somewhat skewed because employees of New Mexico Indian Tribes and their casinos are considered government employees in the data it used.

It may be noted that Key Policy Data is staffed by persons who previously worked for the American Conservative Union Foundation, the Tax Foundation and the Heritage Foundation.

Speaking generally about whether New Mexico state and local employees are or are not overpaid, there are plenty of indications that state and local government employees are not overpaid. The average salaries of New Mexico’s school teachers are 45th in the nation. The average salary for an assistant district attorney in Bernalillo County is around $42,000 (for someone who has had three years of law school and who has passed the bar exam). it’s clear that Albuquerque is not paying enough to keep or attract police officers. The same is true for Bernalillo County’s Metro Detention Center, the state police and case workers for the State’s Human Services Department.

The Rio Grande Foundation argues in its Op-Ed that in setting salaries, the government should recognize the present high unemployment rate in New Mexico and pay no more than local labor market conditions would warrant. This is not a sound strategy.  Teachers, police officers and other government employees are mobile and will go where pay is higher. Paying rock bottom salaries to government workers would diminish the quality of government services. If the public wants good government services, good employees must be attracted to government service. That is how the private sector operates, using wage levels to attract sufficient, high quality human resources.

Claim: The Rio Grande Foundation Op-Ed also claimed that New Mexico’s state and local government workforce is bloated, based on The Key Policy Data report referred to above. It says that New Mexico has the second-most state and local government employees relative to private-sector workers.

Analysis: Wrong Again. The Key Policy Data report compares the number of state and local government workers to the number of the State’s private sector workers only, ignoring again the large federal presence in the State. 

New Mexico’s private sector employment is relatively than in other states because of the large federal presence at our state’s military installations, federal agencies and national laboratories. The thousands of federal government workers in New Mexico require and are entitled to state and local government services too. So the Key Policy Data makes little sense.

Also, the number of state and local employment employees is overstated because the data for government workers includes employees of tribes and their many casinos.

Claim: The Albuquerque Journal editorialized on April 2, 2016 that New Mexico state government does a bad job of delivering return on investment for the tax dollars it spends. It also says New Mexico has the 17th highest level of state and local taxes per capita based on those 18 and older at 10.65%

Analysis: The Journal may be correct about the quality of state services. But WalletHub’s calculation of a 10.65% tax burden was based on U.S. median household incomes, not New Mexico median household incomes, and therefore came up with the wrong answer.

The first question one might ask is: who is WalletHub? It is not a research organization. It is web-based seller of financial services. It says it is a “one-stop destination for the tools and information consumers and small business owners need to make better financial decisions”. WalletHub does not appear to be ideological. It likely puts out its reports in order to get news coverage that drives consumers to its website.

The WalletHub study the Journal apparently relied upon that rated the quality of state services is “2016’s States With the Best & Worst Taxpayer ROI (

The stated purpose of this study was to contrast state and local tax rates with the quality of services provided by each state within certain categories: Education, Health, Safety, Economy and Infrastructure & Pollution.

WalletHub gave New Mexico poor rankings in each of these categories (except for infrastructure and pollution). But that came as no great surprise. On the other hand, is it fair to suggest all of the fault lies with government employees, rather than the State’s political leadership?

However, it was not the same WalletHub study but another that came up with the 10.65% tax rate calculation. This other WalletHub study is entitled “2016’s States with the Highest & Lowest Tax Rates” (

First, this other WalletHub surveyed effective total state and local tax rates and it stated that the effective rate of New Mexico’s state and local taxes was 10.65% and it said that 10.65% was the level of state and local taxes on households, not per capita as the Journal said.

However, WalletHub came up with the 10.65% tax rate by applying New Mexico’s total state and local tax rates to the median income of U.S. households, not to the median income of New Mexico households. Using this method, WalletHub calculated the annual New Mexico tax bill at $5,741and gave New Mexico taxes an “Overall Ranking” of 26th lowest.

But when Wallethub applied New Mexico’s total state and local tax rates to New Mexico’s median household income, WalletHub came up with annual taxes of $4,912 rather than $5,741. It further ranked New Mexico state and local taxes as 20th lowest when it applied the cost of living index.

What is demonstrated by all this is that there are all kinds of comparisons and it’s important to know just what is being compared and whether the comparison being made by an unbiased and reputable research organization.

In the “Careful What You Ask For” category, consider the timeworn political strategy of Republicans and their radio and television affiliates scaring the pants off the public.

It’s no wonder the Republicans are pulling out all the stops. As a conservative columnist noted recently: “America is in greater economic shape than any other major nation on earth. Crime is down. Abortion rates are down. Fourteen million new jobs have been created in five years.”

Not to mention the vast reduction in the number of Americans now in harm’s way amidst the endless religious wars of the Middle East.

So what are the threats that are said to eclipse an otherwise sunny future?

It’s the fearsome threat of all those “criminal” Latin Americans crossing our southern borders and, of course, a world full of dependably “murderous” Muslims anxious to bring down our democracy—all made worse by a sitting President who “spinelessly” fails to send armies to the Middle East to teach Iran and ISIS a thing or two.

Well, it has to be acknowledged that the fear strategy is indeed working again. In fact, it seems to be working a bit too well.

The GOP is finding its presidential race dominated by two Presidential hopefuls whose threats and tirades against illegal immigrants and Muslims etc. etc. are attracting large numbers of the nervous and frightened.

But these candidates’ success is sending shivers down the spines of the Republican establishment, according to a recent Politico story.

“There are at least two candidates who could utterly destroy the Republican bench for a generation if they became the nominee” says Mitch McConnell’s former chief of staff.

One of these two candidates, who inherited great wealth, trumpets (pun intended) a brilliant business career more notable for the number of bankruptcies than for smashing successes. Of him, a GOP stalwart who served in the last three Republican administrations says, “he has repeatedly revealed his ignorance of basic matters of national interest”, adding that “he would be the most unqualified president in American history”.

The other candidate is full of bombast, venom and ambition (but flexible, if need be). He may not be able to get along with anyone, much less his Republican Senate colleagues. But he’s the darling of a narrow band of the Republican rich and faithful who are so far to the right of the GOP conservative establishment that they gave up on Ronald Reagan who they deemed insufficiently ideologically pure.

With GOP leadership hoist on their own petard with this unhappy state of affairs, it will be interesting to see how they get out of this pickle. They’d like to somehow build consensus around a more mainstream candidate. Problem there is, other candidates are now beginning to follow the path of Trump and Cruz seeking similar success, Marco Rubio being a prime example.

Meanwhile, Politico reports, some down ballot Republicans across the country are already figuring out how to put distance between them and a Trump or Cruz Presidential candidacy.

I guess this is the sort of stuff that makes politics so endlessly interesting.

My Left Knee

November 14, 2015 — Leave a comment

My left knee has served me well for over 70 years and I appreciate its faithful service.

But in the interests of the rest of my body, we’re parting company. It’s not the knee, it’s me. I need to move on.

I know that I will no longer be able to claim for myself a quality deemed of great importance these days: “All Natural”.

I don’t care.

It’s my decision and if people don’t like it, fine.

It’s all about the pursuit of my personal aspirations: to be healthy, good-natured, energetic, not limping.

The GOP Debate

October 31, 2015 — Leave a comment

The Republican Presidential candidates are complaining about the types of questions they received at the last debate and are threatening to set their own debate rules. To help out, here are some questions they might be looking for:

QUESTION 1: What is your favorite color?

QUESTION 2: Who was your favorite teacher?

QUESTION 3: What is the name of your favorite pet?

QUESTION 4: Is there anything else you would like to say?

My most recent post on Tuesday May 5 detailed how, during the three days starting April 28, I talked to a dozen or so Comcast employees by phone and in person trying to get internet and telephone service into the condo we had just moved into. Ultimately these services became available only because I kept calling for three solid days until I found someone at Comcast with the skills to address the problem.

I then pointed out my victory dance at this point was premature because while it was giving me the runaround, Comcast had cancelled our 45-year old phone number and given us a new one so that if we called someone, Caller ID displayed a new and unfamiliar number and that we were calling from Hobbs.

As I said in my last post, Comcast staff had promised on both on Friday, May 1, and on Monday, May 4, that we would definitely be getting our phone number back in 48 hours of my phone calls to them. The 48 hours from the Monday promise ran out on Wednesday, May 6, with no results.

Nor did our phone number come back on Thursday.

So on Thursday afternoon I made yet another call to Comcast. Yes, they said, we see the work order in your records and so we will now connect your old number.

[So, you might ask, why was this order just sitting there until I called? Maybe these people need some To Do Lists?]

After another 30-40 minutes of back and forth, I was told the new phone number was now transferred and in two hours it be working just fine.

Of course, the number didn’t come back either that night or the next morning.

So I called Comcast again on Friday and they referred me to the “Activation Center” which I had found typically operates from the Philippines. It employs ESL operators who work from a very limited menu of possible solutions. I had already had a number of disappointing experiences with the Center.

But luckily my call did not go to the support desk in the Philippines but instead to someone with good English and technical skills. While it took about an hour, I am pleased to report that we did actually retrieve our original phone number on that day, May 8 and it continues to work for all three of the days since then.

Hey, it was only 11 days that people were being told our number had been cancelled. And maybe some of them were telephone solicitors.

So what does this experience tell us?

Without competitors to Comcast, there will just be more of the same in our future, except that the price will keep going up. Comcast is not likely to have good systems then and it still won’t be adequately training its support staff.

Perhaps our condo building will switch over to DIRECTV after Comcast’s contract runs out. But then who will provide high-speed internet service? Comcast will do it but will the price be reasonable and can we deal with the hassle?

Other alternatives?

CenturyLink’s internet service is quite slow, a reminder of the dial-up days.

Google is expanding its internet service to more communities across the country and is actually laying fiberoptic. Albuquerque with its economic woes is not likely near the top of their list.

Perhaps if AT&T does buy DIRECTV as it now proposes to do, maybe it will find a way to provide reasonably-priced robust internet service to its DIRECTV customers in New Mexico.

And maybe those said to be planning to provide low-cost internet service with low-orbit satellites will do so sooner, rather than later.

There is hope.

In any event, the cable and satellite model of delivering lots of channels we don’t use or want for a fat price is on the way out. More and more first-rate programming will move to the internet just as HBO is moving right now. But that does require that we have reasonably-priced high-speed internet access.

It is possible that with the unbundling of cable TV programming and the increased availability of good programming over the internet, maybe the incumbent cable and satellite providers will somehow conclude they are playing a losing game and feel the need to start serving their customers far better than is now the case.


[FYI, if you want, you can leave a voicemail complaint about Comcast by calling the City of Albuquerque’s Franchise Authority at 768-5340. But don’t expect a callback. I’m still waiting.]

In April, we moved out of our longtime residence to a condo at Park Plaza in downtown Albuquerque.

Because the remodeling of our unit wasn’t to be done until late in April, we moved temporarily to a vacant unit on another floor.

There our Comcast cable, telephone and internet worked flawlessly for a month.

TUESDAY (April 28). We moved into our own unit. The same Comcast equipment was installed. We had cable but no internet or telephone service.

I called Comcast but they couldn’t fix it over the phone so a technician was scheduled to come between 9 and 12 on Wednesday.

WEDNESDAY. I stayed home all morning but the technician never showed. I called Comcast and was told that the reason no one came was that no one had been scheduled to come. I asked how that could be but there was no answer for that.

I asked that another technician be sent but I was told that the computer system would not allow another technician to be sent for unknown reasons. I asked to speak to a supervisor and was told the supervisor was in a meeting but would call in 45 minutes.

Never got that callback. So I drove to the local Comcast office and after a 40 minute wait, was told that the previous occupant of our new unit had not used Comcast services. Therefore it was necessary that some “back office” actions be taken. Once that was done, I was told, then a technician could be scheduled to come to our condo.

But it would take 48 hours.

THURSDAY. Not having got a promised status callback, I was back on the phone with Comcast. By some miracle, I managed to reach a person with technical skills. This person got both the internet and phone working. Without a Comcast technician had coming to our condo.

FRIDAY. I was relaxed and relieved to have finally gotten the Comcast problem resolved.

Then I learned that those calling our phone number were being told it was no longer in service. Called Comcast and was told we had been assigned a new phone number, replacing the one we had enjoyed for the past 45 years.

I expressed my consternation and demanded our old phone number. This could be done, I was told.

But it would take 48 hours.

MONDAY. A promised callback when the problem was resolved never came. Those calling our old number were still being told our number was no longer in service.

I called Comcast again. The person who answered said he would try to restore our original phone number. I suggested that failure to do so would have grave consequences. Back on the line, the support person reported that happily our old number was still available and was being assigned back to us.

But it would take 48 hours.

TUESDAY. Tomorrow, May 6, the 48 hours will be up. Will we really get our phone number back? It’s Tuesday afternoon and it hasn’t happened yet.

Any bets?

It’s hard to see why it makes any sense to approve the new Navajo gambling compact, especially when you consider that all the other gaming tribes are able to have the same agreement and all of them will live on for another 22 years.

There is little doubt that there is a serious problem gambling problem in New Mexico. Yet the new compact continues the practice of asking the gaming tribes to do very little about the problem they are creating.

The National Council on Problem Gambling estimates that 1.2% of New Mexicans (18,795) are problem gamblers. The private agency selected by the gaming tribes and racinos to provide treatment to problem gamblers reports that it treated 196 problem gamblers in 2014.

The gaming tribes provide little money for treatment. For example, the new Navajo compact will only require the Navajo casinos to provide around $200,000 of their $80 million net win to support treatment of problem gamblers.

Plus we have no information about the nature of these services or the results.

At the same time, the Navajo compact would extend the hours of casino operation, allow casinos to extend credit to gamblers, and also allow them to provide more than $2 million in food and lodging to selected gamblers each year.

We can expect this will only add to the numbers of problem gamblers without adequate treatment.