|Time to Focus on Jobs
National economic growth is at a standstill. Large cuts in federal programs loom ahead. New Mexico is highly dependent on federal dollars to float our economy. The federal government spends over three dollars on us for every dollar New Mexicans send to Washington. Hang on to your hats, because as tough as it is to find a job in New Mexico now, it could get much worse.
While it may take a year or more for the Federal cutbacks to ripple through our economy, it will also take that long for any new state-driven job creation policies to have an impact. We need decisive action now. We need to act on multiple fronts. We need to focus. Nothing else is as urgent.
Here are a few concrete ideas to help get us on track.
The "no brainers."
- Eliminate loopholes that allow out-of-state companies to use in-state bidding preferences to land government contracts. Projections show this could create up to three thousand New Mexican jobs. Similar legislation was vetoed last session.
-Expand Foreclosure Mediation program across the state. Foreclosures depress real estate values, hurt consumer confidence and kill economic activity. Over forty-five percent of the foreclosures that have gone to the first judicial district pilot Foreclosure Mediation program have been resolved with homeowners keeping their residences. That is an amazing success rate that can only help protect property values and buoy consumer confidence.
-Approve a capital outlay program during the upcoming special legislative session that directs funds to job creating projects. At this point in time we cannot afford to spend capital outlay on purchases of out of state produced equipment or services. Over $200 million was sucked out of our local economies when the 2011 regular session capital outlay bill failed to pass. We need to put these resources to work for New Mexico job seekers.
Strategic Tax Reform
For many tax reform has come to mean tax reduction. And "business friendly" tax reform has come to mean tax reductions for the wealthy. But tax breaks to well-heeled interests have not created jobs during this business cycle. We know this because all of those tax break dollars are parked un-invested along with trillions more. Meanwhile key job-creating activities like long overdue road maintenance, public safety and infrastructure investments go unfunded.
New Mexico can stimulate private sector jobs, and improve its current level of services through revenue-neutral tax reform.
The first step is to eliminate gross receipts taxes (GRT) on transactions between businesses. This tax does not exist in other states, and it is particularly onerous on small businesses and start ups. While large businesses perform many functions in-house without being taxed, smaller firms that farm out work find themselves taxed and re-taxed at each step of their business process. Eliminating this levy will free up working capital, stimulate investment, and make New Mexico far more attractive to relocating businesses.
Step two is to recover lost business-to-business GRT revenue by eliminating many of the over three hundred special interest tax breaks that decorate our tax code, and by correcting other obvious tax inequities. Legislation was passed last session to conduct an independent review of the tax breaks, but was vetoed. Other tax revisions could include eliminating favorable tax treatment for out-of-state companies, taxing out-of-state internet businesses the same as our in-state businesses, reducing an extraordinarily generous capital gains tax break that primarily benefits wealthy out-of-state investors, and repealing the Richardson tax cuts for income over two hundred thousand dollars.
Help Stabilize Real Estate Markets
The real estate bust precipitated the great recession and our current economic stagnation. Stabilizing real estate will be central to our recovery. While nearly everyone played some role in creating the real estate bubble, I believe big national banks are primarily responsible for extending the misery of the bust.
Banks took trillions in bailouts from taxpayers and are repaying the favor by refusing to write down mortgage balances for credit-worthy homeowners whose loans are worth more than their houses. The irony is that it costs banks far more to let homes go into foreclosure than to renegotiate loan principal balances where possible. Some analysts project that, nationwide, one million jobs would be created annually if the banks wrote down loan principal to market value on all homes currently underwater. Until the banks step up to the plate and renegotiate these obligations, consumers and the economy will be in turmoil. If the top four banks could afford $140 billion in executive compensation in 2009, it seems only fair that they -- and not the taxpayer -- foot this bill.
There are a number of state measures that could push banks in the right direction. Foreclosure abuses could be minimized by requiring full disclosure of a borrower's rights including mediation. Lenders could be required to put a small payment into a foreclosure emergency relief fund when originating any new loan. We could require banks to pay a borrower's legal fees when they successfully file suit against a foreclosure action - another vetoed measure from last session. We can pressure federal regulators to change accounting rules that discourage banks from restructuring loans. A combination of these measures can have a significant impact on bank practices, real estate values, and most importantly borrowers, who can move on to a normal life instead of facing eviction.
Mobilize underutilized resources
The New Mexico Finance Authority currently has $300- 400 million of unutilized bonding capacity. On average, 6 permanent jobs are created for every million dollars of NMFA bonding. We need to be more imaginative in putting these resources to work. Investment options could include energy efficiency retrofit programs for public buildings, road improvements funded through local fees or tax levies, and grant awards to help borderline projects meet bonding criteria.
There are many other job creation ideas that I do not have space to detail here. I will post them on my website as they are developed in the coming months. In the meantime keep your legislature and Governor on task by telling us what's important. My constituents are saying jobs!
State Senator Steve Fischmann represents district 37. His web address is stevefischmann.com
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