Several years ago, the New Mexico Legislature passed a new tax credit to incentivize homeowners and businesses to install solar energy systems. And it was incredibly successful. The state Energy Conservation Division estimates that more than $31 million was spent by New Mexico businesses and homeowners on solar panels and heating systems in just the past year. But, the tax credit is set to expire this year unless the Legislature takes action to renew it.
Rep. Sarah Maestas Barnes, R-Albuquerque, and Sen. Mimi Stewart, D-Albuquerque, have both introduced legislation to restore the tax credits. Both bills would maintain the current benefit of as much as 10 percent of the total cost, up to $9,000, in the upcoming years, with that amount being reduced incrementally starting in the year 2019.
We have argued before, and continue to believe, that New Mexico’s tax code has far too many exemptions and credits benefiting specific special-interest groups. We believe the state would be better served by a simpler, fairer tax system without all the loopholes and special benefits. But we don’t believe that effort should start by eliminating solar tax credits. The tax credits continue to make good sense for the state on a number of levels. Maestas Barnes notes that the solar industry in New Mexico includes 98 companies that employ some 1,600 workers. And, it is a growth industry, with those numbers continuing to increase every year.
More than $140 million was invested by owners in solar panels between the years 2008 and 2014, according to state officials. On top of that, another $29 million was spent on labor to install the systems. Nearly $14 million in tax credits were issued. “These jobs are homegrown and cannot be outsourced,” Stewart noted. Increased use of solar energy has also reduced our state’s reliance on energy produced through burning either coal or natural gas, limiting the environmental damage caused by those traditional sources.
There are those who will argue that the solar energy industry does not need the same boost it did several years ago when it was still developing, and that the state should not give up the revenue that is now lost to the tax credits. Certainly, the industry has matured in recent years. But the investment to purchase a solar system is still out of reach for many New Mexicans without some kind of assistance.
The solar energy industry in New Mexico would surely survive the loss of the tax credits, but its momentum would be stalled. Fewer new companies will locate in the state, and fewer workers will be hired. We think the better option is to phase the credit out slowly and predictably over several years, as is called for in the Maestes Barnes and Stewart bills.