Bruce King and tax policy: Lessons learned
With the passing of former Gov. Bruce King, a lot of us are recollecting our favorite King moments.
One of mine was his role in the Big Mac tax cut. It’s a lesson that’s relevant today.
In 1981, state coffers were bursting with oil and gas money. Euphoric lawmakers expected a $200 million surplus. Not only could they bankroll their pork projects, they could give money back to taxpayers.
But how to give back the public’s money? Liberals wanted to send money to the masses. Conservatives wanted to spread it around and shovel some cash to private industry in hopes of fueling expansion and jobs.
King, always middle of the road, wanted to bless everyone, especially small businesses, but rain less on big business. He and Colin McMillan, the Republican chairman of the House Taxation and Revenue Committee, crafted a compromise bill dubbed the Big Mac.
Mid-session, Kay Marr, secretary of the Department of Finance and Administration, splashed cold water on their feverish plans. New Mexico could end up $100 million in the red if President Ronald Reagan’s promised tax and budget cuts materialized, she said.
King, who first suggested the tax cut, now urged a go-slow approach until they better understood the impact of federal cuts. But in the giddy atmosphere of the Roundhouse, most lawmakers didn’t want to hear it. They approved more than $1 billion in appropriations, plus the largest tax cut in state history. Lt. Gov. Roberto Mondragon refused to sign the measure.
As the Big Mac gained momentum, King began to work behind the scenes for phased-in tax breaks, which could be undone should the need arise. King infuriated lawmakers with a line-item veto of the property-tax portion of the bill, and the so-called Cowboy Coalition of Republicans and conservative Dems tabled all appropriations bills.
McMillan insisted there was plenty of money to fund money bills and his tax cut. Opposing the measure was like standing up to a tsunami. In the end, King signed. The Big Mac cut personal income taxes by 25 percent in 1981, and 33 percent in 1982, and shrank gross receipts taxes.
McMillan predicted the Big Mac would set the tone of fiscal policy in the state for the next ten years. And so it did, but not as he expected.
That year oil and gas revenues started to tail off, federal funding slumped from 32 to 15 percent of state general fund revenues, and a deep recession rolled across the country. (Does any of this sound familiar?)
In 1982, state revenues took a dive. Gov. Toney Anaya took office, in 1983, with two priorities — balancing the budget and breaking the Cowboy Coalition. Facing a $180 million deficit, he raised personal income taxes 30 percent, corporate income taxes 20 percent and restored gross receipts taxes to the previous level.
Max Coll, a veteran of oil and gas who succeeded McMillan as chairman of the House Taxation and Revenue Committee, said later that booms fueled by energy prices don’t necessarily justify tax cuts. “What goes up has got to come back down unless you repeal the law of gravity.”
It was a painful lesson that haunted lawmakers during subsequent flush times; they cited it in 2001, when Gov. Gary Johnson wanted to cut taxes. In 2003, when Gov. Bill Richardson proposed a tax cut without cutting spending, lawmakers developed amnesia.
It took a lot of starch for King to urge caution when everyone around him, it seemed, had lost their heads. I reminded King of his thankless stance years later. He pumped my hand and thanked me for remembering.
Now we find ourselves in a similar place, for many of the same reasons. Why is it that we only hear the voices of caution after the fact?
©2009 New Mexico News Services