With two tax proposals unveiled today, Gov. Susana Martinez stepped away from the tax philosophy* that tax bases should be as broad as possible so the rates can be as low as possible. Martinez proposals also do their bit for raising taxpayer compliance costs by creating niche exemptions for taxpayers to try to understand.
Telling small businesses with a preacher-style ring to her voice that, “We will walk alongside you,” she unveiled idea of a $1,000 tax credit for every job created by businesses employing fewer than 100 people. This would be a two-year program. Businesses would have to “retain” the new employee, whatever that means.
Martinez spoke at noon to the New Mexico chapter of the Commercial Real Estate Development Association (NAIOP, www.naiopnm.org).
The other proposal was to exempt veteran’s retirement pay from state income tax. Now who could say no to veterans for the sake of tax philosophy?
After Martinez finished her presentation, I had a quick chat with the accountants sitting next to me.
For someone earning $30,000, the benefits might run $20,000, making $50,000 the cost of the new employee. That proposed $1,000 is two percent of the new employee’s cost, not enough of a difference at the margin to tip the hiring decision.
Compliance might be the bigger issue. We already have tax credits. Dealing with the bureaucracy in order to qualify for the credits is nearly impossible. A typical business owner lacks the time or expertise to run the bureaucratic gauntlet and probably lacks the money to pay the accountants for the chore.
* The New Mexico Tax Research Institute serves the tax-guru role. (http://www.nmtri.org)
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