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HOUSE MEMORIAL 51
57
TH LEGISLATURE
- STATE OF NEW MEXICO -
FIRST SESSION
, 2025
INTRODUCED BY
Patricia A. Lundstrom and Derrick J. Lente and Mark Duncan
and Micaela Lara Cadena and Elaine Sena Cortez
A MEMORIAL
REQUESTING THAT THE CONSENSUS REVENUE ESTIMATING GROUP
INVESTIGATE AND REPORT ON THE IMPLICATIONS OF STATIC SCORING
AND DYNAMIC SCORING ON FISCAL POLICY PROPOSALS.
WHEREAS, accurate economic evaluation is critical to
maintaining New Mexico's balanced budget, as required by the
state constitution, and to ensuring that tax and budgetary
decisions do not create unintended fiscal shortfalls; and
WHEREAS, static scoring estimates the revenue impact of a
fiscal policy change by assuming that taxpayers and businesses
do not significantly alter their behavior in response to the
change, holding economic output constant and focusing only on
direct revenue effects; and
WHEREAS, dynamic scoring takes into account how tax policy
changes may influence broader economic activity, such as
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employment, investment and consumer spending, which in turn can
affect the tax base and overall revenue collections; and
WHEREAS, while dynamic scoring provides a more
comprehensive view of the long-term economic effects of tax
policy, it has been shown to introduce greater uncertainty due
to the need for economic modeling and assumptions about
behavioral responses; and
WHEREAS, New Mexico relies on fiscal impact reports to
assess the revenue and budgetary implications of taxation and
spending proposals, and these reports are typically based on
static scoring methods that do not account for macroeconomic
feedback effects; and
WHEREAS, dynamic scoring, which considers changes in
economic activity resulting from fiscal policy changes, has
been utilized in the past in New Mexico, including a two-year
dynamic scoring pilot project authorized by House Bill 28 in
2003 for proposals with fiscal impacts exceeding ten million
dollars ($10,000,000); and
WHEREAS, concerns regarding the complexity and uncertainty
of dynamic scoring have been raised, including from the
consensus revenue estimating group, so that its use was
discontinued following the analyses of former Governor
Richardson's sponsored tax cuts by the department of finance
and administration at the time; and
WHEREAS, the legislative finance committee's fiscal impact
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reports have noted difficulties in using dynamic scoring for
budget forecasting, highlighting the uncertainty surrounding
the magnitude and timing of economic effects beyond direct
fiscal impacts; and
WHEREAS, federal agencies, such as the congressional
budget office and the joint committee on taxation, have
incorporated dynamic scoring under congressional rules,
reflecting an ongoing debate about the role of dynamic scoring
in fiscal policy analysis; and
WHEREAS, previous research, including a 2014 study by the
university of New Mexico bureau of business and economic
research on corporate income tax changes, has demonstrated
challenges with using dynamic scoring in quantifying economic
behavior changes resulting from tax policy adjustments; and
WHEREAS, New Mexico has undertaken significant tax policy
changes in recent years, including reductions in gross receipts
tax rates and reductions in personal income tax collections,
necessitating a clear understanding of the potential revenue
implications under both static and dynamic scoring models;
NOW, THEREFORE, BE IT RESOLVED BY THE HOUSE OF
REPRESENTATIVES OF THE STATE OF NEW MEXICO that the consensus
revenue estimating group staff be requested to undertake a
review of literature and a study of the implications of static
and dynamic scoring on fiscal policy proposals, including both
taxation and spending and receipts; and
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BE IT FURTHER RESOLVED that on or before September 1,
2025, the consensus revenue estimating group staff report their
findings and any recommendations to members of the legislative
finance committee, including examples of the application of the
two scoring methods on specific examples of revenue changes and
spending proposals, which examples shall include the dynamic
effects of eliminating or reducing the personal income tax
along with a commensurate reduction in state spending and
significant additional highway project construction spending
with commensurate additional state revenue collections; and
BE IT FURTHER RESOLVED that copies of this memorial be
transmitted to the governor, the secretaries of taxation and
revenue, finance and administration and transportation, the
chair of the senate finance committee, the chair of the house
appropriations and finance committee and the director of the
legislative finance committee.
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