In April, residents of Doña Ana County, New Mexico (home of Las Cruces) voted 50.7%-49.3% to approve a 1/4-cent sales tax increase to part fund construction of a $198 million space vehicle launchpad. (Additionally, one-quarter of the taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. revenue goes to “spaceport-related education in local schools.”) Local boosters hope the spaceport will attract the space industry to the area. Tax collection is scheduled to begin January 1, 2008.
Or maybe not. Under the state law providing additional funding, three counties were required to enact taxes and contribute funds. The other two counties, Otera and Sierra, have yet to even schedule election dates. Because it is doubtful that a tax would even pass, some Doña Ana County residents are reluctant to begin paying a tax that cannot, and may never, be spent.
Doña Ana County Manager Brian Haines told commissioners last month he wouldn’t feel comfortable collecting the tax if there was no way to spend it. If the district never forms, the county would be stuck with a pool of money that it wouldn’t know what to do with, he said.
However, officials aren’t sure whether they can unilaterally delay the tax’s collection. Sounds like Doña Ana County put the cart before the horse without a backup plan. Careful thinking can sometimes go out the window when local and state governments seek to use tax money to attract industry, such as by building stadiums, office parks, or even credit card call centers. Taxpayers could end up with the worst of both worlds-paying taxes that can’t be spent on a project that, even if built, might not live up to all the stratospheric expectations people have for it.
As we put it in our 2008 State Business Tax Climate Index summary:
Lawmakers create these deals under the banner of job creation and economic development, but the truth is that if a state needs to offer such packages, it is most likely covering for a woeful business climate plagued by bad tax policy. A far more effective approach is to systematically improve the business tax climate for the long term.