BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  1

DATE:  February 27, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER: HJM - 57

SPONSOR: Representative Heaton

BILL SHORT TITLE: Direct RSTPC to study the state’s tax system

DESCRIPTION: this joint memorial directs RSTPC to study the state’s tax structure and the relationship between the state and local governments. The primary duty of the study is examine the adequacy of the system for the 21st century. A collateral duty is to analyze the relationship between state and local taxing authority and service responsibilities. The interim committee is expected to develop “revenue neutral” recommendations and report these recommendations by December 15, 2001.

EFFECTIVE DATE: not stated – 90 days after adjournment (June 17)

FISCAL IMPACT: none

ADMINISTRATIVE IMPACT: as in previous years and previous studies, the Department will provide as much help as possible in this effort. However, the Department’s long-time tax policy director is retiring in June, and TRD’s long-time chief economist will be in Russia on a Fulbright Fellowship from September 2001 through June 2002. Thus, the Department will be very short of relevant knowledge and experience to bolster committee deliberations this next interim.

OTHER IMPACTS AND ISSUES:
1.	The Tax Research Office of TRD has prepared a history of tax studies. This document, entitled Summary of Various Studies of New Mexico's Tax Structure, New Mexico Taxation and Revenue Department Special Report, May 31, 1994 is available from the Department.

2.	Doing a proper job of studying the state’s tax structure, its impact on various classes of individuals and businesses, proposing and testing alternatives, supervising the decision-making process and preparing a final report is an arduous, time consuming and expensive project. Two models – (1) interim legislative committees with limited resources but participation of legislative members and private citizens; and (2) blue ribbon “professional tax study” committee with limited resources and limited public input – have been tried in New Mexico within the last 15 years. Unfortunately, most of the time and effort of these committees have been spent with education of committee members. Research efforts have been half-hearted and poorly supported. Concerted efforts to implement recommendations have been equally half-hearted. It may well be time to expend some money on hardware, software, expertise and staff and make a concerted effort at both the staff and decision-maker levels. Staff would properly need to develop a comprehensive state economic model to calculate feedback effects of various tax and expenditure policy changes. Similarly, staff would have to develop comprehensive tax burden models, using cutting-edge methodology to determine the magnitude of various tax shifting mechanisms. At minimum, the state should plan on spending $320K for two years. A chief economist, at least one senior economist, a full-time programmer, a part-time tech writer and substantial amount of contract legal talent will be required to do a top-notch job.  RSTPC’s main job should be to shape the structure of the study committee and recommend the appropriate staff resources.