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62 International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020

THE IMPACT OF COVID-19 ON THE ECONOMY OF NEW

MEXICO: THREE SCENARIOS

Ali Arshad

New Mexico Highlands University

ABSTRACT

This study estimates the potential impact of another rise in COVID-19 on the economy of

New Mexico. Tracing changes in final demands in 220 key sectors, the consequences are assessed

based on three scenarios: low, medium, and high contractions representing the equivalent of one,

three, and six months contractions in output due to a resurgent COVID-19 induced shutdown of

non-essential businesses. Using the IMPLAN (economic impact assessment software system)

input-output technique and the New Mexico inflation-adjusted economic data for 2017, the direct,

indirect, and induced impacts on employment, labor income, output demand, and tax revenues

have been calculated. The estimates show that the 2020 pandemic poses a grave danger to the

State’s economy. The contractions in the economy have the potential of increasing the

unemployment rate throughout New Mexico.

Keywords: COVID 19, economy, New Mexico economic impact assessment software system

INTRODUCTION

The Coronavirus disease (COVID-19) that is presumed to have originated in 2019 has

affected people worldwide. As of October 21, 2020, the Johns Hopkins University’s Coronavirus

Resource Center reported that more than 41 million people had been impacted by this disease

worldwide, resulting in over 1.1 million deaths. The United States leads the world on both

counts, with 8.3 million cases and 221,500 deaths for the same period (Johns Hopkins University

of Medicine, 2020). In New Mexico, 37,896 people have tested positive, resulting in 942 deaths,

as of October 21, 2020 (Coronavirus Disease 2019 in New Mexico, 2020).

According to the International Labor Organization (ILO), 94 percent of all the countries

have had some shutdown. In comparison, in the upper-middle-income countries, about 70

percent of workers had faced a complete shutdown. The work stoppage has unsettled the global

labor market resulting in a loss of working hours by 17.3 percent or a full-time equivalent of 495

million jobs in the second quarter of 2020. The developing countries have been hit the hardest by

this pandemic (International Labor Organization, 2020).

From February to September 2020, New Mexico experienced 64,300 job losses, an

equivalent of a 7.4 percent decrease (Ettlinger, 2020). According to the Bureau of Labor

Statistics (BLS), the New Mexico unemployment rate that stood at 4.8 percent in February 2020

jumped to 11.9 percent in April. It began to seesaw with the opening and closing of businesses,

and by September, it dropped to 9.4 percent, after reaching a high of 12.4 percent in June

(Bureau of Labor Statistics, 2020).

In New Mexico, Governor Michelle Lujan Grisham declared a Public Health Emergency

on March 24, 2020, shutting down all businesses except those deemed essential (New Mexico

Department of Health, 2020). On April 11, she issued a clarification regarding the definition of

essential businesses. By June 1, restaurants were allowed to open for indoor dining. After a

relatively slower proliferation of this deadly disease, New Mexico is experiencing the highest

International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020 63

coronavirus spread rates in the US. According to the Harvard Global Health Institute and Brown

School of Public Health, New Mexico is one of the 21 states that were “at the tipping point” in

October (Kelleher, 2020). The State announced new regulations for restaurants, retailers, and

lodging places in October (Coronavirus Disease 2019 in New Mexico, 2020).

If there is another spike in this disease’s incidence, the impact could be devastating for

one of the country’s poorest economies. So far, as we know, there has not been a systematic

study to gauge the shutdown’s effect on the economy of New Mexico due to this novel

coronavirus. This study aims to address that need. This paper estimates the economic impact of

COVID-19 on the New Mexican economy if there is another spike in the cases that results in

more shutdowns.

The author mapped out the changes in final demands in 220 key sectors and assessed the

consequences based on three scenarios: the equivalent of one, three, and six months contractions.

The methodology utilized here is the IMPLAN (Impact Planning) input-output technique. Using

the New Mexico inflation-adjusted economic data for 2017, the author estimated the direct,

indirect, and induced impacts on employment, labor income, output demand, and tax revenues.

The estimates showed that the 2020 pandemic poses a grave danger to the State’s economy. The

contractions in the economy can increase unemployment throughout New Mexico to almost the

Great Depression levels.

BACKGROUND OF THIS STUDY

Since the Covid-19 pandemic is so novel and recent, the literature is scant, and the

research is ongoing. Almost all the inquiries done so far have appeared as working papers for

prestigious research institutes or proceedings in a conference. Many models replicated the

methodology used to calculate the economic impact of Severe Acute Respiratory Syndrome

(SARS), which appeared in 2002. McKibbon and Fernando (McKibbon, 2020) conducted one of

the earliest studies regarding the virus’s economic impact across the globe. Using a hybrid

dynamic stochastic general equilibrium model and computable general equilibrium model, they

studied the global impact of the 2020 pandemic under seven different scenarios. They

demonstrated that even a contained outbreak would seriously affect the world, at least in the

short run. To mitigate the magnitude of the impact, they recommended increased investment in

all economies and even more significant investments in less developed countries’ economies

with a dense population.

In another working study on Covid-19, Atkeson (Atkeson, 2020) introduced a SIR

Markov model to help economists calculate the cost of pandemic’s progression in the United

States over the next year to one-and-a-half years. The model lets economists make empirical

conclusions regarding the tradeoff between the economic cost of strict social distancing for a

year to a year-and-half and the economic cost of lost work time.

In his model, Atkeson divides the population into three categories: those who are

susceptible to the disease (S), those who are actively infected (I), and those who have recovered

or are dead and no longer contagious (R). Their model is also an if-then model that asks how

severely the pandemic may affect the healthcare system if the active infection rate exceeds 1%

and 10% . His main conclusion is that the severe public health consequences can be averted by

taking strict social distancing measures for an extended period until a vaccine is on the market.

One study presented at the National Academy of Sciences’ Proceeding looked at the

coronavirus’s economic impact on small businesses. The article based its finding on a survey of

64 International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020

over 5,800 small businesses conducted between March 28 and April 4, 2020. Some of the

questions were to find the virus’s actual impact in the initial period, while the other questions

addressed small business owners’ fears. The authors found that “mass layoffs and closures had

already occurred” at the outset of the pandemic. The owners’ perception was that the longer the

crisis persisted, the greater was the risk of business closures. Half of the business with more than

$10,000 in monthly expenses had only two weeks of the cash-on-hand left when the survey was

conducted. These businesses were planning to seek funding under the Coronavirus Aid, Relief,

and Economic Security (CARES) Act (Bartik et al., 2020).

In a working study for the United Nations University, Sumner, Hoy, and Oritz-Juarez

(Sumner, Hoy, & Oritz-Juarez, 2020) estimated the potential impact of COVID-19 on global

monetary poverty. They based their findings on three scenarios of the worldwide recession and

specifically investigated the economic impact on per capita household income or consumption.

Their conclusions were stark: COVID-19 posed a severe challenge to the United Nation’s goal of

ending poverty by 2030. Global poverty, which has been decreasing since 1990, would increase

for the first time. The pandemic had the potential of reversing the gains, bringing the poverty

level back to where it was before 1990 for some adversely affected regions of the world.

Although the federal government can mitigate the adverse impact at the national level

using fiscal and monetary policies, states may find fewer tools to combat the effect. The effect of

sustained closures for a longer time would have a devastating impact on a state’s economy. New

Mexico is one of the most impoverished regions in the US, with a less diversified economy.

There has not been any systematic study of how COVID-19 may affect the State of New

Mexico’s economy. Although the State has not been as severely affected by the virus as other

neighboring states like Texas, Arizona, and Colorado, any prolonged shutdown would negatively

impact it. This study hopes to fill this gap.

The author of the current study investigates the impact of COVID-19 related closures on

New Mexico using IMPLAN’s Input-Output Model. While no model can predict every effect,

the input-output models can account for wider-reaching economic implications since they trace

relationships across regions and among industries. Typically, the IMPLAN model is used to

evaluate a stimulus program’s effect or a shutdown of economic activity on affected industries.

This model’s advantage lies in its comprehensive scope. It includes 546 inter-industry

relationships at different levels, ranging from zip code to national data. As such, the input-output

model using IMPLAN’s methodology can be useful in analyzing the short-run impacts of

COVID-19.

Research Question

Although economists have talked about the transformational power of COVID-19 on the

US economy, we must also focus on the economic hardships on states in the short-run. As the

weekly trends approach record levels in the winter months and the prospects of another round of

shutdown as an imminent possibility, it is vital to analyze their economic impact on a relatively

poor economy such as New Mexico for one, three, and six months periods. In this paper, the

author attempts to answer the following question: What would be the impact of COVID-19 on

employment, income, output, and tax revenues if the New Mexican economy is shut down for an

equivalent of one month, three months, and six months?

International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020 65

METHODOLOGY

Sampler and Data Collection

The IMPLAN data contain 546 sectors representing all the North American Industry

Classification System (NAICS) codes. From these, 220 sectors ranging from the oil and gas

industry to the Casino and Gambling Industry have been selected. This study focuses on the

impact at the Statewide level, using IMPLAN’s New Mexico’s input-output data of 2017. It

contains 546 sectors that include all the industries in New Mexico, ranging from dairy cattle and

milk production to local government passenger transit. These sectors are in line with the NAICS

codes. The IMPLAN data also includes employment, employee compensation, industry

expenditures, and commodity demands.

The organization collects raw data from many government sources such as the US

Bureau of Economic Analysis (BEA), the US Department of Agriculture (USDA), the US

Bureau of Labor Statistics (BLS), the US Census Bureau, and many other departments. Once the

data is collected, IMPLAN’s data scientists convert the raw data into customized forms for

individual needs (IMPLAN Group LLC, n.d). For our analysis, 220 sectors, each representing

more than $1million in output, were included. The year of impact is 2020, which is when the

shutdown of the New Mexican economy began. The data accounts for the output and GDP

deflator for each sector.

Procedure In Data Analysis

The basic procedure used in estimating the economic impact owes a debt to the input-

output model developed by the Nobel laureate Wassily Leontief. It was he who first built the

concept of inter-industry interdependence (Miernyk, 1965). The model can quantitatively depict

this interdependence in an input-output table. Published by the Bureau of Economic Analysis

(BEA), the Benchmark input-output for the entire US economy shows how the economy

interlinks the various productive sectors. An economy’s productive activities flow through the

inter-connective chains of dependence.

This interconnection is depicted by developing an input-output table. Creating an input-

output relationship between industries involves solving a system of matrix equations. This matrix

is the Leontief Matrix, which can estimate the impact of the initial impetus or shock that ripples

throughout this interconnected general equilibrium economy. This initial shock triggers a

multiplier effect on all the tied industries.

The point of departure is a Regional Transaction table describing each industry’s

purchases from other industries. From this table, we derive a coefficient matrix by dividing each

Industry column element by the column total. The resulting matrix known in the literature as the

A Matrix contains columns representing the production function showing where an industry

spends and in what proportions. From the A Matrix, a series of linear equations can be derived.

In matrix notation, these equations can be represented as:

X = A*X + Y (1)

where output Xi is equal to transactions (A*Xi) plus final demands (Yi). Subtracting the

transactions (A*X) from both sides yields the following:

66 International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020

X – A*X = Y (2)

To arrive at a predictive multiplier model, we isolate the X term and form the identity

matrix. In matrix notation, it is:

(I-A) * X = Y (3)

where “I” is the identity matrix. Solving for X gives us the Leontief Inverse. The predictive

multiplier model, thus, is of the following form:

X = (I-A) -1

* Y (4)

The (I-A) -1

is the matrix of the multiplier. So, a change in total industry demand is the

result of a change in final demand times the multiplier, or,

∆X = (I-A) -1

*∆Y (5)

The input-output economic model develops this inter-industry relationship within a

region. Thus, whenever a first impetus occurs, the inter-industry connection generates a

multiplier effect in the first and subsequent rounds throughout the economic region. The linkages

between industries are backward as well as forward. This iteration is now captured and

manifested in the various modeling tools, such as developed by the IMPLAN Group. Their

economic impact planning models systematically encapsulate the effect of the initial shock on

the regional economy. Economists recognize the inter-industry analyses as a useful way of

finding the economic impact of an initial impetus.

The IMPLAN platform collates national data and converts it to the IMPLAN data

format, deriving the national input-output matrices and their coefficients at the national, state,

county, and zip code level. In conjunction with their model, the data shows the influence of

industries on a region’s economy. Their model can be used to estimate the impact of an increase

or decrease in a particular industry’s final demand. The effect is shown in terms of employment,

output, labor income, and value-added. Their software and data can give the researcher a

“window into [the] region of study—like one gigantic transaction log for the local economy”

(French, 2018).

IMPLAN’s input-output model is not based on surveys but is primarily a derivative of a

national model. Its data come organically from various sources and in different formats. It then

converts the data into a coherent form. Any lacuna is filled by carefully estimating them while

keeping in line with related data to support its accuracy (Minnesota IMPLAN Group, 2004).

Their software creates matrices that are specific to a region. It assumes a constant national

production function and uses the Regional Purchasing Coefficients (RPC) to constructs Social

Accounts that describe the regional input-output relationships, including transfers among sectors.

The model creates two types of multipliers, Type I and Type Social Accounting Matrices

(SAM). Type I multipliers calculate the direct and indirect effects. The direct effect is the initial

impact of an investment, while the indirect impact occurs when industries buy from the supply

chains. Type SAM multipliers generate direct, indirect, and induced impacts from the social

account matrix’s information.

The indirect effects, combined with increased household spending or the induced effects,

are mathematically derived from “sets of multipliers.” Recognized in the economic literature as

International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020 67

the Leontief inverse, they describe each sector’s incremental output caused by every increase in

final demand for a given industry. The model assumes a constant marginal propensity to

consume of households, capturing their spending pattern’s forward implications. This

relationship accounts for leakages, such as payroll and income tax, institutional savings, and

commuters’ outflow (Chang, 2001).

The predictive ability of the model is dependent on the multipliers. They describe how

the local economy responds to a stimulus. It is the final demand for goods and services that set

the input-output model in motion. Industries delivering the final products and services purchase

intermediate goods and services from other producers—inputs used to produce final goods and

services. These intermediate goods producers, in turn, buy products and services from others.

These are known as indirect purchases, and they represent indirect effects. These “continue until

leakages from the region (imports, wages, profits) stop the cycle.”

In this study, the author simulates the effects of the three scenarios mentioned above

using the following assumptions:

1. The effect of the equivalent of a one-month shutdown— assumed as one-twelfth less output.

2. The effect of the equivalent of a three-month shutdown—assumed as one-fourth less output.

3. The effect of the equivalent of a six-month shutdown—assumed as one-half less output. 4. Most sectors deemed non-essential and subject to a shutdown would witness a decline in

the demand for their goods and services, while a few other essential sectors would notice

an increase.

5. All these three scenarios take no account of any stimulus payment to alleviate the effects.

As mentioned above, the IMPLAN data contains 546 sectors representing all the NAICS

codes. From these, selected the author has selected 220 sectors ranging from the oil and gas

industry to the Casino and Gambling Industry. The decisions regarding the increase or decrease

in output demand are based on conclusions reached by Standard & Poor Market Intelligence

(S&P Global, 2020), International Labor Organization (ILO, 2020), and the definition of

“essential businesses” by the State of New Mexico (Coronavirus Disease 2019 in New Mexico,

2020).

Of the 220 sectors included in the current study, the author assumed that 76 of those

sectors would see an increase in demand, while the rest would decrease, again based on what

would remain open and what would shut down. Some of the obvious industries assumed to show

a cutback in output includes restaurants, gasoline stations, aero parts industries, among others.

The industries whose demand for goods and services is expected to increase include grocery

stores, frozen food manufacturing, couriers and messenger services, software services, among

many others. It is assumed a constant 15 percent increase in demand regardless of how long the

other sectors remain closed. On the other hand, for sectors adversely affected, the decline in

output is based on whether the shutdown is for one, three, or six months.

STUDY FINDINGS

As indicated above, using IMPLAN’s impact planning tool, the interrelationships within

the economy, between various sectors, and households can be examined. The model captures all

68 International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020

monetary relationships at any given time. It allows for studying the impact of any disturbance,

positive or negative, in one or many productive activities on an entire region. The input-output

process shows the multiplier effect of these shocks to the economy of a region. In the short run, it

can alter the economy.

Scenario One: One-Month Shutdown

The abatement of economic activities in most of the sectors would result in significant

loss of jobs, income, and output and has the potential of bringing about a sustained slowdown of

the economy. As shown in Table 1, one-month closure of businesses due to another spike in

COVID-19 would result in 38,546 total job losses. These losses include 29,489 direct jobs, 3,990

indirect jobs due to reduced orders to the supply chains, and other 5,067 jobs lost due to reduced

spending by the households directly impacted by the job losses.

The associated loss in total labor income would be more than $1.1 billion, while the

shrinkage in the demand for goods and services would cause the gross state product to decrease

by $6.2 billion. Based on the BLS figures, we can roughly calculate the relationship between job

loss and the rise of unemployment in New Mexico. If 38,546 jobs are lost in a one-month

shutdown, the estimated increase in the unemployment rate would be about 2.1 percent, bringing

the State’s unemployment rate, by December 2020, to 11.5 percent (Bureau of Labor Statistics,

2020).

Table 1 below summarizes the result of the equivalent of a one-month shutdown of non-

essential businesses.

Table 1

One-Month Impact of COVID-19 on the New Mexican Economy

Impact Type Employment Labor Income Output

Direct Effect -29,489 ($708,997,598) ($4,290,240,316)

Indirect Effect -3,990 ($217,114,736) ($1,199,817,065)

Induced Effect -5,067 ($200,198,980) ($670,068,703)

Total Effect -38,546 ($1,126,311,314) ($6,160,126,084)

Table 2 shows the ten most impacted industries due to a one-month shutdown in all of

New Mexico. People would travel less, go out to eat fewer times, and postpone plans for buying

or selling houses, adversely impacting the related industries. The job loss is a result of the direct,

indirect, and induced effects combined.

International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020 69

Table 2

Top Ten Industries Impacted by a One-Month Shutdown

Description Job Loss

Retail - Gasoline stores (4,226)

Limited-service restaurants (3,187)

Real estate (2,981)

Full-service restaurants (2,946)

Wholesale trade (2,768)

Extraction of natural gas and crude petroleum (1,513)

All other food and drinking places (1,255)

Offices of physicians (1,249)

Truck transportation (1,180)

Retail - Miscellaneous store retailers (1,175)

The shrinkage in the economy would have a noticeable effect on the state coffers. An

additional month of the shutdown would cause the state and local government to witness a

decline of more than $392 million in taxes. Table 3 summarizes those losses in New Mexico.

Table 3

Loss of State & Local Tax Revenue Due to a One-Month Shutdown

Description Total

Dividends ($3,800,074)

Social Insurance Tax- Employee Contribution ($179,730)

Social Insurance Tax- Employer Contribution ($359,591)

Sales Tax ($220,130,841)

Property Tax ($87,989,703)

Motor Vehicle License ($4,057,526)

Severance Tax ($44,288,264)

Other Taxes ($6,855,572)

State and Local Non-Taxes (Fines- Fees) ($1,037,524)

Corporate Profits Tax ($4,000,978)

Personal Tax: Income Tax ($14,977,994)

Personal Tax: Non-Taxes (Fines- Fees) ($1,765,692)

Personal Tax: Motor Vehicle License ($1,536,290)

Personal Tax: Property Taxes ($333,417)

Personal Tax: Other Tax (Fish/Hunt) ($1,175,109)

Total State and Local Tax ($392,488,305)

70 International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020

Scenario Two: Three-Month Shutdown

Although a three-month shutdown may seem farfetched, another sharper spike in the

incidence of COVID-19 with high mortality rates may very well result in such a scenario. In

such a situation, the increase in job loss would be 3.9 times more than a one-month shutdown,

while the loss in income would be almost five times, and the shrinkage in output would be about

3.4 times.

A more significant loss in income, without any income-support program, would have a

devastating effect on New Mexican households. A loss of 152,032 jobs would increase

unemployment by an estimated 8.3 percent, everything else being constant. That could bring the

unemployment rate to about 17.7 percent between November 2020 and January 2021. Table 4

shows the three-months impact of COVID 19 on employment, labor income, and output in New

Mexico.

Table 4

Three-Months Impact of COVID-19 on the New Mexican Economy

Impact Type Employment Labor Income Output

Direct Effect -106,927 ($3,739,940,084) ($13,985,441,842)

Indirect Effect -19,805 ($884,470,363) ($3,444,744,153)

Induced Effect -25,300 ($1,000,492,846) ($3,349,001,827)

Total Effect -152,032 ($5,624,903,293) ($20,779,187,822)

Table 5 summarizes the job losses in the top ten industries impacted by a three-month

shutdown. The pattern is almost similar.

Table 5

Top Ten Industries Impacted by a Three-Month Shutdown

Description Job Loss

Real estate (11,091)

Limited-service restaurants (10,691)

Full-service restaurants (10,123)

Wholesale trade (8,644)

Employment services (4,492)

All other food and drinking places (4,240)

Offices of physicians (4,181)

Services to buildings (3,964)

Retail - Miscellaneous store retailers (3,804)

Truck transportation (3,546)

An equivalent of a three-month shutdown would result in 3.2 times bigger revenue loss

for the State and Local governments than a one-month shutdown. These revenue deficits would

imperil the State’s obligations to meet its expenditure goals. Table 6 shows the three-month loss

of revenue of the New Mexico State and local governments.

International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020 71

Table 6

Loss of New Mexico State & Local Tax Revenue Due to a Three-Month shutdown

Description Total

Dividends ($11,107,200)

Social Insurance Tax- Employee Contribution ($1,011,487)

Social Insurance Tax- Employer Contribution ($2,023,711)

Sales Tax ($683,814,382)

Property Tax ($273,331,187)

Motor Vehicle License ($12,604,297)

Severance Tax ($137,577,056)

Other Taxes ($21,296,147)

State and Local Non-Taxes (Fines- Fees) ($3,222,965)

Corporate Profits Tax ($11,694,419)

Personal Tax: Income Tax ($74,119,401)

Personal Tax: Non-Taxes (Fines- Fees) ($8,737,621)

Personal Tax: Motor Vehicle License ($7,602,411)

Personal Tax: Property Taxes ($1,649,931)

Personal Tax: Other Tax (Fish/Hunt) ($5,815,088)

Total State and Local Tax ($1,255,607,303)

Scenario Three: Six-Month Shutdown

An equivalent of a six-month shutdown would have a devastating effect on the New

Mexican Economy. The long-term structural damage from such a closure may put the State’s

economy at par with the economy during the height of the Great Depression. The author

estimates that if the stoppage of the economy is for that long of a period, a staggering 333,663

jobs would be lost, some forever, resulting in a decline of $12.9 billion in labor income and a

$45.7 billion in output. If our scenario’s job loss is correct, the unemployment in New Mexico

could reach the Depression levels at 27.6 percent. Table 7 presents the six-months impact of

COVID 19 on the economy of the New Mexico State.

Table 7

Six-Month Impact of COVID-19 on the New Mexican Economy

Impact Type Employment Labor Income Output

Direct Effect -226,514 ($8,479,678,957) ($30,197,650,251)

Indirect Effect -49,054 ($2,139,059,704) ($7,822,682,297)

Induced Effect -58,095 ($2,297,820,647) ($7,691,792,532)

Total Effect -333,663 ($12,916,559,307) ($45,712,125,080)

72 International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020

Table 8 presents a summary of the top ten industries that would be severely impacted by

an equivalent of a six-month shutdown.

Table 8

Top Ten Industries Impacted by a Six-Month Shutdown

Description Job Loss

Real estate (23,536)

Full-service restaurants (21,037)

Wholesale trade (17,624)

Limited-service restaurants (13,237)

Employment services (9,832)

All other food and drinking places (8,716)

Services to buildings (8,245)

Retail - Miscellaneous store retailers (7,713)

Independent artists, writers, and performers (7,269)

Truck transportation (7,148)

Again, a longer-term closure would more than double the State and Local government’s

revenue losses, causing tremendous hardship for the residents. The author has estimated all these three scenarios based on no moderating fiscal or monetary policy at the national level.

Table 9

Loss of State & Local Tax Revenue Due to a Six-Month Shutdown

Description Total

Dividends ($22,760,282)

Social Insurance Tax- Employee Contribution ($2,382,590)

Social Insurance Tax- Employer Contribution ($4,766,917)

Sales Tax ($1,427,138,302)

Property Tax ($570,449,273)

Motor Vehicle License ($26,305,493)

Severance Tax ($287,126,868)

Other Taxes ($44,445,611)

State and Local Non-Taxes (Fines- Fees) ($6,726,411)

Corporate Profits Tax ($23,963,583)

Personal Tax: Income Tax ($169,842,914)

Personal Tax: Non-Taxes (Fines- Fees) ($20,022,060)

Personal Tax: Motor Vehicle License ($17,420,751)

Personal Tax: Property Taxes ($3,780,779)

Personal Tax: Other Tax (Fish/Hunt) ($13,325,142)

Total State and Local Tax ($2,640,456,976)

International Journal of Business and Economics Perspectives, Volume 15, Number 1, Fall 2020 73

CONCLUSION

This study modeled the impact of COVID-19 on the economy of the State of New

Mexico using three scenarios. It did not include the mitigating effects of any federal government

stimulus or any income-supplementing policies at the State level. All three scenarios portray a

grim picture regarding the outcome for New Mexico’s economy. Many people have looked at the

prevailing pandemic situation as a tradeoff between the urgent needs to attend to public health

and the economy. It does not have to be that. A happy medium between strategically opening the

economy and still lessening the pandemic’s impact can be negotiated. The author hopes that

policymakers would devise sound policies regarding public choices to alleviate the devastations

which the pandemic forebodes and provide support for businesses and households adversely

affected by a sharp spike in COVID-19 cases in New Mexico.

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About the Author:

Ali Arshad is an Associate Professor of Economics and Finance at the New Mexico Highlands

University. His research interests are in International Economics and Economic Development

with a focus on the economic impact of EB-5 Investments.

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