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|
SPONSOR: |
Heaton |
DATE TYPED: |
2/06/02 |
HB |
335 |
||
|
SHORT TITLE: |
New Job Tax Credit |
SB |
|
||||
|
|
ANALYST: |
Smith |
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REVENUE
|
Estimated Revenue |
Subsequent Years
Impact |
Recurring or Non-Rec |
Fund Affected |
|
|
FY02 |
FY03 |
|
|
|
|
|
(0.1) |
Indeterminate |
Recurring |
General Fund |
(Parenthesis ( ) Indicate Revenue Decreases)
SUMMARY
Synopsis
of Bill
This
measure would allow credits against income taxes. The credits would reward
employers for hiring people during “distressed periods” – periods in which
county or statewide seasonally adjusted unemployment rates increase by .5
percent over unemployment rates that occurred during same month of the prior
year. The credits would be for “...twenty-five percent of the first sixteen thousand
dollars ($16,000) in wages paid for the qualifying job.” In other terms, the
maximum credits allowed per qualifying job would be $4,000. The credits may be
taken against a variety of taxes, including gross receipts, compensating, withholding,
personal or corporate income tax liability. The credits may not be taken
against local option gross receipts taxes, hence revenues received by local
governments would be largely unaffected by the credits. Jobs for which the
credits may be taken – “qualifying jobs” in the bill’s vernacular – are
full-time private-sector jobs in industries other than retail trade. They must
pay at least $10 per hour. Workers in the qualifying jobs must be newly hired
employees. Further, they must not be owners of the firm in any respect; for
example, own stock in the firm taking the credits.
FISCAL IMPLICATIONS
TRD
notes that the impact is truly indeterminate. Impacts are potentially large,
since the credit is not “capped”.
TECHNICAL ISSUES
TRD
notes that the way in which the credit system would work is a little uncertain
but appears to be roughly as follows: Suppose in any particular month the
unemployment rate is .5 percent above the unemployment rate in the same month
of the previous year. This event initiates a “distressed period”. The bill does
not seem to specify when a “distressed period” ends, but it would presumably be
in any month in which the unemployment failed to be .5 percent above the unemployment
rate in the prior year, and could range from one month to an indefinite number
of months. In any event, a “distressed period” initiates a “qualifying period”—defined
in the proposal as “a period of twelve months beginning on the day an eligible
employee begins working on a qualifying job during a distressed period or the
period of twelve months beginning on the anniversary of the day an eligible
employee began working in a qualifying job during a distressed period."
Hence a “distressed period” seems to precipitate a 12-month period – a
“qualifying period” in which tax credits may be claimed, assuming an employer
meets other criteria specified in the bill.
The measure's intent thus appears to be to alleviate unemployment in New
Mexico by triggering a series of tax credits that would encourage employers to
hire people during times when unemployment rates increase.
As
evidenced by the definitions quoted above, it is unclear to TRD how the measure
would work. TRD would need to issue regulations to set guidelines regarding how
the measure would be interpreted.
Seasonally
adjusted unemployment rates are often unavailable on a county basis. There is
no need to use seasonally adjusted rates because seasonality is eliminated by
simply comparing figures for a particular month to figures for the prior year
month. The appropriate specification would therefore probably be that
seasonally adjusted rates must be compared with seasonally adjusted rates, or
seasonally unadjusted rates must be compared with seasonally unadjusted rates
from a previous year.
Language
in the measure is not clear regarding whether employers would be eligible for
the credits during a statewide distressed period and a county distressed period
simultaneously. If the intent is to allow one or the other, the proposal should
be modified to make this clear.
TRD
notes that the measure would probably make forecasting General Fund revenues
difficult because its impacts on the General Fund would need to be estimated
and taken into account. 2) Unemployment rates in small counties are extremely
sensitive to small variations in the labor force. The civilian labor force in
Harding County currently consists of 450 people, with about 20 people
unemployed, hence an unemployment rate of 4.4 percent. An increase of two
unemployed people would raise the unemployment rate to 4.9 percent and
precipitate the credits allowed under the proposed program
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