With state government revenue forecasts sliding by the week, state Rep. Luciano “Lucky” Varela offered a bill to eliminate tax breaks for 43 businesses and groups including railroads, airlines, lottery retailers and even jockeys at racetracks.
Members of the House Business and Employment Committee said they agreed with Varela’s premise that many tax credits might be counterproductive. But the Republican-controlled committee still defeated his bill Thursday on a 7-4 vote, saying a more comprehensive review of tax exemptions is necessary.
Varela, D-Santa Fe, said eliminating the tax credits he targeted would save the state $112 million a year. His assessment brought immediate challenges from lobbyists for businesses. They said at least some of the tax breaks Varela wanted to eliminate have created jobs and helped the economy.
Lobbyists for Southwest Airlines and Union Pacific Railroad challenged Varela. Southwest Airlines added 231 jobs in Albuquerque last year, bringing its total to more than 700, the company’s lobbyist said. A lobbyist for Union Pacific said the railroad sparked a warehousing and trade boom in the Southern New Mexico border town of Santa Teresa. Jet fuel and locomotive engine fuel both receive tax credits.
Rep. Miguel Garcia, D-Albuquerque, supported Varela’s bill as a means of determining which tax credits are helpful and which are giveaways that only drain the state treasury. “I appreciate your having the intestinal fortitude for putting this on the table,” Garcia said.
Rep. Conrad James, R-Albuquerque, voted against Varela’s bill. James said the proposal made no mention of the movie industry, which can receive up to $50 million a year in tax rebates.
Filmmakers and television companies can receive the rebates for qualified expenses only if they film in New Mexico. Supporters of the program, who now include Republican Gov. Susana Martinez, say movies bring new money to the state and employ people.
A more common criticism of Varela’s bill came from the committee chairwoman, Rep. Jane Powdrell-Culbert, R-Corrales. She said his measure did not provide details on the full scope of tax deductions and which ones are not helping the state. Other members said the tax credits and deductions cost more than $900 million a year.
In an interview after the committee tabled his bill, Varela said he focused on tax credits that applied to businesses rather than individuals. He also said he developed his list of deductions that could be eliminated by focusing mostly on those that cost the state at least $1 million a year and, in many cases, more than $5 million.
The items Varela highlighted included high-profile deductions, such as for airlines, and obscure ones, including a tax break for jockeys on their purses.
This is Varela’s last regular session as a legislator. He is retiring at year’s end after 28 years in the House of Representatives. Nonetheless, he said, he hoped lawmakers would continue reviewing tax credits as a means of easing state budget problems.