By Paul J. Gessing
According to New Mexico’s Tax and Revenue Department rebate checks (or transfers to bank accounts) will be going out at any time during the middle of June. At the Rio Grande Foundation we welcome the $500 or $1,000 (depending on single/married filing status). This is especially true at a time when inflation is rising faster than wages.
But New Mexico is in the midst of an unprecedented boom in its oil and gas industry and, while those checks are nice, they are a pittance relative to the windfall being experienced in State government. Worse, unless the Legislature and Gov. take concrete action and soon to diversify the economy, New Mexico will waste this unique opportunity.
First the numbers: according to the Legislature’s analysts, the one-time “cost” of the rebates is $667 million. You may recall that the Legislature began the 2023 session with a surplus of $3.6 billion and spent $1.2 billion of that.
Though new spending was “just” double the amount of the rebates, the reality is that almost all of the money not spent this year will be put into reserves to be spent in the future. That means that more than 80 percent of this year’s budget surplus will ultimately be spent (unless the Legislature enacts some real tax cuts in the 2024 session).
There are a few major points to be made:
- During her reelection campaign Gov. Lujan Grisham decried Mark Ronchetti’s rebate proposal as a “fiscally irresponsible socialist scheme” and said it would eliminate funding for the state budget. What changed?
- It is widely acknowledged that New Mexico needs to diversify its economy, but neither more spending nor one-time rebates will do that. When will Lujan Grisham and Democrats in the Legislature get serious about making New Mexico less dependent on oil and gas?
- While RGF applauds genuine efforts to diversify the economy, oil and gas revenues show no sign of slowing down. That’s because New Mexico is in a production-driven boom, not a price-driven boom. So, rather than allowing a scarcity mentality to drive tax cut and tax reform decisions, policymakers should understand that strong revenues are here for the foreseeable future and should be used to get New Mexico out of its unnecessarily impoverished state.
Like all New Mexicans we at the Rio Grande Foundation welcome these rebates. What we are looking for out of Lujan Grisham and the Legislature is some kind of coherent economic strategy (besides simply spending more money). It is time to translate our oil and gas wealth into prosperity for ALL New Mexicans. That requires average New Mexicans to engage with and hold this Legislature and Gov. accountable for their policy decisions.
Paul Gessing is president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility