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Monday, January 11, 2010

It's R.I.P. For Food Tax, So What's Next? Plus: More Of Our Blogging On The Big Economy Story, Also: US Attorney Name Moves To Fore 

They haven't even checked in to their hotel rooms, but state legislators appear to have already killed one major tax proposal--the move to reinstate the gross receipts tax on food. All 25 House R's are against it and Think New Mexico reports they now have more than 10 Democrats on the record against the tax. That gives the food tax foes over 35 votes in the 70 member House, even before the 30 day legislative session begins January 19. Add to the mix Big Bill's new position--"I'm not terribly excited about changing the food tax"--and you can say with some assurance that this food fight is over before the first pie is thrown.

But some food tax critics are now concerned that a tax on junk food--sugary drinks and the like--and an increase in the tax on booze and cigarettes will be eyed. They argue, as they do against an overall tax on food, that this would hurt low and middle income New Mexicans the most. They also argue with some persuasiveness that the price of a pack of smokes and a six pack of beer has already been taxed to the max.

Both the Guv and key legislators want $200 million in new annual revenue to solve the state's deficit of $500 million or more for the budget year that starts July 1, but raising any tax with soaring unemployment and business in a rut is a dicey proposition for the 70 House lawmakers who all stand for re-election this year.

LET'S TALK TAXES

Insiders point to several taxes that carry less political risk and do not target the working classes. For example, closing a tax loophole for national chain stores that costs the state anywhere from $25 to $100 million and a small increase in the excise tax on new car sales--currently 3 percent--are two ideas that might not raise the political red flags.

The Guv revealed in an ABQ Journal pre-session interview that the still unspecified "temporary" tax increase he wants would be for three years. Earlier he said he wanted the tax to stay in effect until the economy recovered. State revenue projections we've seen don't have the state returning to a $6 billion budget--its peak--for at least three years. And that may prove optimistic.

HITTING A NERVE

Critics of any tax increase just keep coming with powerful ammunition for more budget cutting and restructuring of a bloated state government. They can now cite the revelation from State Senate President Pro Tem Tim Jennings about the outlandish legal contracts signed by the State Investment Council. The SIC is asking lawmakers for nearly $6 million to pay high-priced lawyers--up to $950 bucks an hour!--to cover legal fees associated with the ongoing investment scandals. It seems the scandal is spawning a scandal of its own.

Jennings hit a nerve with Mr. and Mrs. New Mexico here. There are plenty of good lawyers out there who would be more than willing to work for less than half of what the state is authorized to pay the San Francisco law firm of Paul Hastings Janofsky & Walker LLP. Doesn't anyone at the SIC know how to negotiate?

REALITY CHECK
The Guv
Big Bill declared in his newspaper interview that his biggest accomplishment as Governor "has been transforming New Mexico's economy into a modern economy, alluding specifically to the state's renewable energy industry and burgeoning film industry..."

But those efforts are embryonic, not transformative. If they were otherwise, they would be generating millions in tax revenues for the state.

No, New Mexico's long-standing economic predicament has changed little since Bill took over in 2003. That old chestnut, "Oil makes the Governor," still rings true as the state's revenue fortunes remain closely tied to oil and natural gas and the royalties they generate. The Land of Enchantment's dependency on a too high gross receipts tax--an inhibitor to business development--also remains firmly ensconced.

The state can't give up on its efforts to diversify, but it's going to take more head banging over education and more intense efforts to grow small businesses. Courting transnational corporations and Utopian start-up ventures (think Eclipse) is fine, but giving away the store to get them is not.

The Guv will not budge on his cherished 2003 income tax cuts for the wealthiest taxpayers nor will he consider any increase in the very low capital gains tax rate. But by adjusting those rates upward and then giving tax breaks to small business and/or reducing the gross receipts tax, the state would score twice--restoring fairness to an out of kilter tax code born in the long dead bull market and assisting small businesses that can build an economy that will truly be transformative.

US ATTORNEY UPDATE


Ever since that mid-December speech in which US Attorney Greg Fouratt indicated he knew who was going to replace him and that New Mexico would be pleased with the choice, speculation has centered on prosecutors within the US Attorney's office. Insiders are now talking loudly about Assistant US Attorney Kenneth Gonzales being the White House nominee to replace Republican Fouratt. NM senior Senator Jeff Bingaman has the most say in who gets the gig and he has never released a list of finalists for the post. The job requires US Senate confirmation. We also await the appointment of a new US Marshall for NM, now nearly a year after Obama took over.

ON THE MOVE


Greg Graves, a longtime politico who most recently served as campaign manager for the short-lived GOP Guv candidacy of Greg Zanetti, has been hired by the Republican Governors Association to handle races in the Southwest...Chris Cervini is back with Diane Denish. He's her deputy campaign manager and will oversee communications...

Longtime Republican Betty Rivera takes over as head of the city's cultural affairs department under new GOP ABQ Mayor RJ Berry. She was a cabinet secretary under GOP Gov. Johnson, but we always recall her running a Toyota dealership in the 80's. She'll be paid $97,000 in her new job...We came up short on the city hall salary of Erin Kinnard Thompson, who served as PR flack for Darren White when he was Bernalillo County sheriff and now works for him as an administrative assistant in his new role as city public safety director. The correct salary is $55,000 a year...

PASTA AND POLITICS

There is pasta after politics. At least for former ABQ Dem State Rep. Dan Silva. He and business partner Rosetta Stewart have opened the doors of the Italian eatery "Amici" east of Carlisle and Montgomery in NE ABQ.

Silva had been in the Legislature for several decades before being ousted in the 2008 primary by Eleanor Chavez who now holds his seat. But he is finding a new home with friends and customers at Amici where he greets them almost daily at lunch and dinner while they enjoy flavorful pastas, well-prepared Italian style sandwiches and pizza.

The menu is decidedly not high brow, offering entrees for under $10, but delivering quality with that reasonable price. Dan's wife, Angie, and co-owner Rose attended our table. That made the evening a double pleasure.

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(c)NM POLITICS WITH JOE MONAHAN 2009
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