Lawmakers propose tax credit for chile farmers
ALBUQUERQUE, N.M. (AP)--Two lawmakers and a chile industry group are putting the heat to the state Legislature to give the state's chile farmers a tax credit for every acre of chile they grow in an effort to keep the state's struggling industry and signature crop alive.
Two identical bills introduced in both the House and Senate are requesting a $200 income tax credit for individual farmers and corporations for every registered acre of chile they grow in New Mexico from the summer of 2009 to the end of 2011.
The proposed incentive--a chile production tax credit taken against personal and corporate income tax obligations--was previously endorsed by the Legislature's interim Economic and Rural Development Committee in November, said state Rep. Mary Helen Garcia, D-Las Cruces, who introduced the House bill.
"The greatest concern is that you have less farmers growing (chile) because of the cost and labor involved and there's more and more competition from foreign markets," said Garcia, who co-chaired the interim committee. "New Mexico is known for its chile. What would we do without it? We thought it would be good to try and see if there would be an increase in production" with the tax credit.
State Sen. Bernadette Sanchez, D-Albuquerque, who also co-chaired the interim committee, introduced the Senate bill.
New Mexico's chile industry is struggling to stay alive due to a lack of workers, high labor costs, cheaper foreign imports and increased farming operation costs. Many farmers have switched to machine-harvested crops, which are cheaper to produce, such as alfalfa, corn and cotton.
Chile industry leaders are hoping the tax credit will encourage farmers to go back to growing chile or increase their current acreage.
Acreage is in desperate need of an upswing. Gene Baca, president of the New Mexico Growers Association and vice president of Albuquerque-based Bueno Foods, one of the largest chile processors in the country, says chile crops have declined by about 5,000 acres over the past two years to only 10,000 acres. In 1993, more than 35,000 acres of chile were grown in the state.
"If New Mexico farmers will no longer grow chile, there is little reason for processors to remain in the state and at that point, the industry will largely vanish from New Mexico," Baca said. "The immediate goal of this credit it to negate some of the huge increase in costs farmers have faced caused by policy."
Baca said policies that hurt competitiveness for New Mexico farmers include free trade agreements, minimum wage increases, energy policies that increased production cost and the lack of a coherent immigration policy.
The incentive's three-year time frame is intended to help farmers until machine harvesting is developed and adopted by farmers, which is expected around 2011, Baca said.
"We only ask for a credit during the time when we absolutely need it," he said.
But the tax credit might be a hard sell given the state's dour financial outlook. Garcia said the bill might have a chance since the credit is for a specific timeframe and will not go on indefinitely.
Chile association lobbyist Charlie Marquez is remaining cautious about the credit's chances.
"It's hard to say, given the nature of the financial condition of the state," Marquez said.
Both bills have been assigned to various House and Senate committees.
The credit can be carried forward for three years, is not refundable and is to be applied before any other tax credit.
The tax credit would cost the state $2.9 million in revenue in fiscal year 2010 and $11.2 million in fiscal year 2011 based on 11,000 acres of chile production, according to a financial analysis by the Legislative Finance Committee.
For those who till the soil, the proposed efforts by lawmakers may be too little, too late.
Farmer Jimmy Lytle has grown chile for more than 20 years in Hatch, which is known as "The Chile Capital of the World."
Lytle said he'll take a tax credit "anytime I can get it," but is unsure if the production tax credit could bring the state's farmers back to growing chile.
"The problem isn't that (farmers) don't want to grow it. Imports are the biggest problem. They import so much chile out of Mexico during our season it's killing us," said Lytle, pointing out that it costs over $5,000 to grow and harvest one acre of chile. He said New Mexico chile sells for $16 per bag, while the same amount of Mexican chile is $5 per bag.
"The banks charge us more for interest than what we get for the crop. There were a lot of us (farmers) who lost so much money it's hard for us to come back on," he said.