1. Tax Professionals
  2. Instructional Documents
  3. Weaknesses in the Current FIR Preparation System

Weaknesses in the Current FIR Preparation System

Weaknesses in the Current FIR Preparation System

Dynamic Scoring

It is true that, under some circumstances, dynamic scoring could improve revenue estimates. It is unclear under what conditions benefits estimating dynamic effects of revenue estimates exceed costs, however, as discussed by Dr. Clifford.

Results Sometimes Not Checked

Revenue estimators sometimes do not attempt to discover whether results predicted are accurate. This procedure would, however be difficult and not cost effective in most cases because other events make isolating impacts of a particular change in statute unfeasible in most cases. An example would be the change in the apportionment factor applied to corporate income tax revenues in the early 1990’s. Between the year the statute was changed and the current year, corporate income tax revenues ranged from about $60 to $220 million – for reasons probably not related to the apportionment factor. Estimating actual effect of the legislation would be extremely time consuming, difficult and probably not cost effective.

Insufficient Time for Analysts to Consider Proposals

Analysts continuously face tradeoffs between timeliness, accuracy in calculations and clarity of exposition. It is inevitable that some proposals receive insufficient analysis during legislative sessions. In many cases analysts are provided with bills containing as many as 50 pages of text and that make very complex changes in the New Mexico tax structure. They are then asked to provide an analysis within 24 hours. The measures often contain technical and drafting errors, and would require days to thoroughly analyze.

Failure to Make Technical Corrections

TRD analysts routinely review proposals that are essentially identical to measurers introduced during prior sessions containing technical errors that were discussed in original bill reviews, but not corrected in subsequent drafts of legislation. Analysts therefore routinely point out the same technical problems year after year. Eliminating this problem would reduce costs of FIR preparation and make additional resources available for that purpose.

Failure to Employ Formulas in Statute

An apparent drafting convention is that mathematical relationships must be expressed in words rather than equations in statute. The measure proposed in Exhibit 3 is an example. Individuals propagating the measure apparently had a formula in mind when developing it. This was then translated – probably incorrectly – or at least in a way that prevented very experienced reviewers from readily understanding it. Had the proposed statute been stated as a formula initially, however, it would probably have been drafted correctly and confusion associated with translating text into mathematical terms would have been avoided. A clear statement of the formula would have substantially reduced time required to review the measure.

Other examples abound in New Mexico statutes. These include provisions for apportioning business income under Section 7-4-10 NMSA 1978, mathematical relationships in the Small Cities Assistance Act, the County Equalization Act and yield control statutes applicable to property taxes under Section 7-37-7.1. NMSA 1978.9

9 Understanding the latter requires reasonable familiarity with 9th grade algebra. Since much of the statute is expressed in words, rather than equations, however, generations of taxpayers have been unable to comprehend it.

back to list