House OK's tax break for some DOD work

SANTA FE (KRQE) - A bill that would give tax breaks to companies in two types of growing defense technologies moved forward Monday after the House approved it 51-14.

The proposal, introduced by Rep. Larry Larranaga, R-Albuquerque, would exempt Department of Defense contractors working to support directed energy and satellite projects from the gross receipts tax for ten years.

Directed energy is a technology where lasers, radio waves or microwaves are sent in a directed pulse or burst to disable technology, detonate roadside bombs, to kill or incapacitate the enemy or for other purposes.

Currently New Mexico is a leader when it comes to directed energy research, with work being done at both Kirtland Air Force Base and White Sands Missile Range as well as UNM. But many of the dollars being spent federally go out of state, about two-thirds of Kirtland's contracts according to a fiscal impact report for the bill.

"What happens is once they do the design,  then it's taken out of state and all of the manufacturing, where the big part of the money goes to, is done out of state because we're not competitive enough," Larranaga said.

"I believe this bill would help add 200-300, maybe several hundred more jobs down the road," New Mexico Economic Development Secretary Jon Barela said. "New Mexico is well positioned to take advantage of this industry sector and I think this bill will help us for job creation."

The hope is those would be high-paying jobs.

Tax breaks aren't free though.

The LFC estimates that New Mexico would have to forgo up to $33.6 million in state tax revenue over the next four years. Local governments would collectively miss up to $22.4 million in tax revenue over that same time period.

Rep. Brian Egolf, D-Santa Fe, says the proposal is bad tax policy and the money's better spent elsewhere.

"They just want to blow a hole in our tax code and create yet another loophole on the hope that it's going to bring jobs to New Mexico," Egolf said. "Really what we need to be focusing on is improving our education system."

Egolf's contention is an education system that better supports families attracts more businesses than a tax break.

Larranaga's bill now heads to the Senate.