Beware Big Spenders Bearing Tax Cuts

Finally... a little tax relief, in fact very little. The Mayor on Sunday proposed a 1/8 of a percent reduction in the city's take of gross receipts revenue. (ABQ Journal - Subscription Required) The $18 Million tax reduction would add up to a whopping $70 per household per year.

According to the Mayor (the one with the "or" not the "er"), gross receipts income to the city is running at a 7.5% increase over last year as opposed to the projected 5.3%. Mayor Marty's generosity comes from his belief that "we've done a good job and we have extra money."

First of all, the city hasn't necessarily done a good job here. The economy has generated (or is predicted to generate) additional income for the city. That means we have done a good job. It's our money that's flowing into city coffers at an unexpectedly high rate.

Second, the council and the mayor have done a terrible job keeping city spending under control. Since Mayor Marty took office the city has out spent inflation by $125 MILLION, which is roughly 25% above the rate of inflation (ABQ Journal - Subscription Required).

This tax cut is particularly curious in light of earlier forecasts that predicted a $22 MILLION shortfall for next year. Don't get us wrong here... we're all for a tax cut, even a tiny one. It's certainly a baby step in the right direction. However, the council is already trying to find a way to hold on to the dough saying:

'"I think a tax cut right now would be like pulling a rabbit out of a hat," said Sally Mayer. "I'm in favor of cutting taxes as long as we don't cut services, but I just don't see how that can be done."

Ken Sanchez said he'll be anxious to look at the overall budget proposal. Previous forecasts have suggested the city might need to tighten its belt in the next several years, he said."

(ABQ Journal - Subscription Required)

Just last week Councilor Mayer justified her support of extending the Transportation Infrastructure Tax by claiming that the city would be unable to continue to fund roads, bike trails, and buses without the extension. (Read about it here.) Even the mayor hedged his tax cut announcement with the statement, "I think it is time, for at least a year [emphasis added], for the city to change course financially."

Something is not adding up here. We've got shortfalls, tax extensions, and tax cuts. We've got proposals to build arenas, trolleys, and to rent pandas, all of which will place additional burdens on the city's general fund. From a broader perspective none of this makes any fiscal sense.

However, it does make sense from a political perspective. The mayor has been taking a lot of heat over how much money the city is taking in and how much the city is spending. He's proposing all sorts of new capital programs that will require maintenance and operating money. Now he wants to give us a tax cut "for at least a year."

Politically a "tax cut" is a smart move. Mayor Marty is buying your good will with your own money. He's framing the tax cut as a temporary relief so that when he needs the money back he can raise your taxes and claim that he really hasn't raised your taxes.

Remember the Chavez tenure in the Mayor's Office has not been known for its tax cutting proclivities. It has been known to spend and spend big. Which leads us to believe that this tax cut is more about public relations than about actual tax relief; beware big spenders bearing tax cuts.