Why Mexico Matters to El Paso Taxpayers

Every now and then an issue will pop up that reminds me that not everyone is convinced that El Paso gets any real benefit from sitting on the U.S./Mexico Border, and, in fact, some are convinced that the commerce and the travel between the two cities is a burden to residents who live and pay taxes here.

Not long ago, City Council was debating the issue of whether to impound cars in those cases where the drivers do not have car insurance. Many of the phone calls and emails that I received on this issue had less to do with whether it was a good idea or not and were more focused on how we were going to treat Mexican motorists driving in El Paso without insurance. Never mind that the number of accidents involving motorists from Mexico is a negligible percent of the number of accidents where drivers do not have insurance, some were convinced that most Mexican motorists were breaking our laws and leaving us to pick up the tab.

All of this, plus the recent debate about building a new port of entry, got me to thinking that we don't do a good enough job about talking about why Mexico matters to El Paso taxpayers. I think we have gotten better about communicating the economic benefits of our location on the U.S./Mexico border. We have more jobs here and more business opportunity as a result of robust growth in the maquila industry in Juarez. Many of our retail and service jobs are a result of the hundreds of thousands of Mexican shoppers who travel to El Paso to buy our goods and eat in our restaurants. But what about the taxpayers? How do we benefit?

Our tax base is made up of all different sources of revenue but the one that most people care about is property taxes. Two significant contributors to our tax base that are directly tied to commerce and travel between El Paso and Mexico are sales tax and bridge revenues. Depending on the source, estimates suggest that Mexican shoppers account for 10-14 percent (Federal Reserve) to 30 percent(local retailers) of retail activity in El Paso. Mexican shopppers pay sales taxes that go to our general fund. They are able to get that sales tax rebated through the manifesto program but estimates are that only about 20 percent of Mexican shoppers take advantage of the rebate. Every time someone crosses our bridges heading north, they pay a fee and those fees go straight to the general fund, paying for a whole range of municipal services.

Our adopted budget this year was dramatically impacted, not by the foreclosure crisis in the U.S., but by the drop in bridge revenues and by the drop in sales tax revenues which our analysts attributed to the peso devaluation. Because of this, I asked our budget analysts to tell me what would happen to our tax base if we didn't have Mexico to count on for revenues. If we had no shoppers from Mexico, we would have to slash $6,694,270 from our budget or make it up by raising taxes. (This assumes a conservative estimate that Mexican shoppers make up only 10% of our retail market. This is very, very conservative.) If no one crossed our bridges from Mexico and paid bridge fees, we would have to slash $9,079,244 from our budget or make it up by raising taxes. So approximately, $15.7 million in revenue, or 5.2% of the total annual projected revenue, can be directly attributed to Mexico.

So this is why Mexico matters to El Paso taxpayers. If we couldn't count on that $15.7 million, we would have to decrease services or increase taxes by 5.5 cents from $0.633/$100 to $0.688/$100 based on the certified valuation received on 7/25/2008 to make up for that shortfall. For a taxpayer, this would be a difference of $55 per every $100,000 of valuation on your property.

This is one of many reasons why we need to concern ourselves as El Pasoans with what is happening in Mexico and what we can do to better facilitate the easy movement of people and goods through our ports.