LFC’s first tax‑expenditure briefs: high‑wage and rural‑job credits produce limited fiscal returns but support targeted hiring
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Summary
Legislative Finance released one‑page TaxE briefs for two business credits — the rural job tax credit and the high‑wage job tax credit — and reported both produce modest modeled economic growth while generating less new state revenue than they cost in foregone taxes.
Legislative Finance staff presented the committee with the first short tax‑expenditure assessments (TaxE reports) for two economic‑development tax credits: the rural jobs credit and the high‑wage jobs credit. Both briefs summarized program history, recent usage, modeled economic impacts, and design considerations.
The TaxE briefs are informational: they quantify recent claims, estimate how the credits ripple through New Mexico’s economy using a regional economic model, and identify design features (sunsets, caps, urban/rural eligibility) the Legislature may wish to examine. They do not make policy recommendations or a cross‑sector cost‑benefit comparison — LFC said that can follow if the committee wants deeper comparative work.
For the rural job tax credit, LFC reported the program is small and falling in use: about $637,000 in claims in FY24 across roughly 45 claims. The model estimated an economic return on investment of about 35% (the state economy would grow by 35 cents for each dollar of tax credit), while the modeled return in state revenue was negative 83% — in LFC’s terms the state foregoes roughly 83 cents for each dollar of tax expenditure and receives roughly 17 cents back in direct state tax receipts. LFC noted the credit has no expenditure cap, no sunset and was created at $1,000 per job in 2000; inflation has reduced its real value and usage has declined.
The high‑wage jobs credit showed larger recent usage: LFC reported about $11.2 million in FY24 across 89 claims. LFC’s REMI modeling estimated an economic return of about 47% (growth of 47 cents per dollar spent) and the same negative‑83% revenue return calculation: the modeled increase in state tax receipts is smaller than the tax expenditure foregone. The high‑wage credit is scheduled to sunset on July 1, 2026; it has no statewide expenditure cap. LFC noted the credit targets jobs that meet JTIP eligibility and wage thresholds (different thresholds for urban and rural counties) and therefore is more narrowly targeted than a generic tax break.
Committee members asked whether the briefs could be expanded to include cross‑state comparisons, county‑level distributions and cost‑benefit calculations that would allow the Legislature to compare tax credits to direct, appropriated investments. LFC staff said those deeper analyses are feasible and recommended the committee specify next steps if it wants a full comparative cost‑benefit framework.
LFC also highlighted the briefs’ value as a quick, consistent briefing format — one page, front and back — to help the Legislature track multiple tax expenditures that collectively represent a large share of state fiscal resources. The LFC presenters noted tax expenditures total roughly $3 billion statewide and that economic development credits are a significant slice of that total. Committee members signaled interest in adding new performance measures and clearer sunset/cap rules to tax expenditure design going forward.
