I noticed the column by Ms. Gunther in the Los Alamos Daily Post. It is an unfortunate combination of rehashing a past issue and conflating political posturing with practical policy.
Since I strongly support New Mexico based businesses (see the business-related bills that I advocated) and have a strong record of encouraging New Mexico business development, the column is particularly disingenuous.
A forthcoming column (perhaps columns—this is not a simple subject) will discuss my corporate tax policy position in detail. However, in the interim, I will describe the reason I voted against SB9, the CORPORATE TAX RATES & COMBINED REPORTING bill submitted by Sen. Wirth.
After I attended a National Education Association (NEA) meeting a year ago where combined reporting was discussed, and knowing the issue was to be raised in the 2012 session, I spent time on the issue before the session started.
Briefly, I voted against SB9 for three reasons. First, while I believe that tax evasion techniques used by multi-state corporations such as Best Buy put our NM businesses at a disadvantage, combined reporting is not the answer.
I refer interested people to a study by National Conference of State Legislatures, a national bipartisan organization of State Legislators. Their website is http://www.ncsl.org and the study link is http://www.ncsl.org/documents/standcomm/sccomfc/CombinedReportingFinalDraft.pdf
Pertinent quote from the Executive Summary (pp. vii-viii of the study):
“We find that combined reporting has no direct effect on state tax revenues, which means we find no evidence that combined reporting enhances tax revenues through the first two channels. A small decrease in tax revenues can be expected because of the fall in GDP in high tax jurisdictions and a small increase can be expected in lower tax rate jurisdictions. Further analysis of how combined reporting affects the economy and tax revenues is appropriate in coming years, and our expectation is that combined reporting will lead to a small increase in tax revenues, but at the cost of a modest decrease in the size of the state’s economy.”
Second, an approach called “addbacks” does seem to have a positive impact on state tax revenues, although with a negative impact on state GDP.
Finally, combined reporting is quite costly to implement. It is complex and requires highly skilled tax auditors. For an example of the bureaucratic intricacies, see pp. 43-46 of the aforementioned study for procedures used in New York and Massachusetts.
Given the structure of tax revenues in New Mexico, we have much better ways to level the playing field, increase available resources for important programs such as education, and encourage local business development than trying to implement combined reporting.