Lawmakers: Movement on gross receipts tax not likely

reform for the 30-day session that starts in mid-January, said Taxation and Revenue Cabinet Secretary Stephanie Schardin Clarke, who will chair the new advisory committees announced by the Governor’s Office last week.

“The Tax Policy Advisory Committee will look at issues like that, but I don’t think they’ll, for example, make a bill by this session,” Schardin Clarke said.

That doesn’t mean some lawmakers don’t support such legislation now — or that a bill won’t be drafted on the matter.

Rep. Jason Harper, R-Rio Rancho, said he plans to put forward a bill that would get rid of some exemptions and deductions and possibly lower the gross receipts tax rate — an issue he said he has been working on for years.

Harper said his proposal would likely include bringing back a tax on retail food sales, which is currently the state’s costliest exemption.

Sen. John Arthur Smith, D-Deming, said lowering the tax rate would be good for economic development at a time when the state is increasingly dependent on the volatile oil and gas industry.

“If you get rid of some of the exemptions, it will give us a more reliable revenue stream,” said Smith, who is a member of the interim tax committee and chairman of the Senate Finance Committee.

Still, Harper and Smith said they didn’t believe the initiative would pass in the coming session, citing a lack of political will among lawmakers to take on tax reform.

Tax breaks

Schardin Clarke said there aren’t many exemptions that, if eliminated, would add enough revenue to allow the state to reduce the gross receipts tax “in a significant way.”

The food exemption is the state’s costliest, leading to $250 million in lost revenues, which equals less than half a percent of the tax rate. The combined deduction for prescription drugs and oxygen costs the state $170 million, according to a Taxation and Revenue report issued Wednesday.

Yet, it’s unlikely those two exceptions would be eliminated anytime soon, Schardin Clarke said.

The third- and fourth-largest exceptions are the exemption for nonprofit organizations and the deduction for health care practitioner services, the report said.

Still, Schardin Clarke said it remains a possibility that there could be tax reform in the next session.

“If there are good ideas, I think they’ll be considered,” she said. “I just don’t know the specifics of what they’re looking at.”

Schardin Clarke added that the Tax Policy Advisory Committee would aim to make small changes to the tax code in an ongoing way, rather than aiming for one large tax reform.

“That group isn’t going to just come up with one big proposal,” she said. “They’re going to identify lots of small and medium-sized things that should be tweaked.”

“There’s a lot of low-hanging fruit all over the tax code,” she added.

Access to tax data

One piece of tax-related legislation that could be taken up in January is a version of Senate Bill 151, which was introduced last session but didn’t become law.

That bill, in part, aimed to allow staff economists to see taxpayer information so they could better understand how deductions, credits, exemptions and exclusions affect revenue.

“We should look at endorsing that bill again,” said Sen. Peter Wirth, D-Santa Fe.

In its report, the Taxation and Revenue Department identified a number of exceptions in the tax code for which data was unreliable or nonexistent, making it difficult or impossible to know how much they are costing the state.

Lawmakers expressed dissatisfaction with the lack of information.

“To me, it’s frustrating,” Smith said. “I would think our economists at the Legislative Finance Committee should be entitled to that info.”

The report categorized 11 of the state’s tax breaks as “least reliable” and said their costs had to be “estimated from limited data.” Fifteen of them had “no data available” at all.