Opinion: Tax cuts, industrial innovation are the best ways to stem job losses

By Janice Arnold-Jones
NMPolitics.net
April 22, 2010

New Mexico received more bad news recently with the U.S. Bureau of Labor Statistics report that the state lost 2,200 jobs between February and March, while 33 other states and the District of Columbia added jobs.

While I can’t speak to how the other states are improving, one thing is certain – New Mexico is at a distinct disadvantage with its tax policies and recent package of tax increases passed by the Legislature.

In our tax-happy climate, it may seem unlikely that cutting taxes could be a way out of our current economic malaise. And it will take additional efforts in making New Mexico more business friendly to restore jobs to the state.

But cutting taxes is one way to stimulate private sector businesses to take a chance and add jobs here. This is not a hypothetical solution. My friend, former New Jersey Gov. Christine Todd Whitman, proved it works. As governor from 1994-2001, she cut the state’s income tax by 30 percent ($1.2 billion), reduced her state’s sales tax by 1 percent, cut energy taxes by 45 percent, eliminated state income tax altogether for citizens earning $7,500 or less, and enacted a plan to return $1 billion annually to New jersey residents in property tax rebates.

The result: 450,000 new jobs were created and New Jersey began leading the country in growth and direct foreign investment.

While state income taxes have been cut already, we need similar aggressive cuts in other areas – the severance tax in gas and oil, and revocation of portions of the Pit Rule. New Mexico can’t afford to try and tax its way out of trouble – we’ll drive more people away and just make matters worse, which is already apparent in the alarming rise in unemployment.

Spurring economic activity

In addition to cutting taxes, we must spur economic activity on several fronts. To start, we should strengthen our existing industries such as agriculture and energy. Agriculture is an early adapter of new technologies that have made our ranches and farms more productive. Farmers can now lay in-ground irrigation systems via GPS coded tractors. Dairies are recycling water for conservation. Some are using technologies developed in our universities and national laboratories.

For example, one dairy used a filtration system developed by Sandia National Laboratory to create lactose-free milk. But New Mexico’s permitting processes and regulatory climate is holding back productivity.

We have vast energy resources, but lack transmission infrastructure to export that energy beyond the state. State government can work with the private sector to build that infrastructure and create thousands of new energy-related jobs while increasing revenue.
Reducing regulation

Reducing regulation on existing energy operations is another factor in improving productivity. Between the Pit Rules and state regulations, we’ve already lost our competitive edge in an industry that has been the source of significant state budget revenues. Christine Todd Whitman proved in New Jersey that energy production and protecting the environment are not mutually exclusive. (Her environmental record in New Jersey was very strong.)

Small businesses that create most of our jobs need to be encouraged to increase their own workforce. One way to do that is to privatize some activities in state government, and allow small businesses the opportunities to bid on providing those services.

We can also reduce the regulatory and tax burden on small business. For example, during the 2009 legislative session I proposed HB 415 that would have provided a gross receipts tax credit to small businesses that remain open for more than five years, with credit percentages increasing incrementally the longer the businesses lived. But the bill died.

We must put partisan politics aside and find real-world solutions that will put New Mexicans back to work and diversify our economy. We must start with sensible tax and regulatory policies that stop punishing our job creators and encourage innovation in our existing industries and small businesses.

Arnold-Jones is a Republican gubernatorial candidate and state representative who is a member of the House Tax and Revenue and Voters and Elections committees.