Lawmakers, governor need to revise NM taxes

There is a logic and a fairness to broadening the state’s grossreceipts tax base while lowering the rate. There’s also a definite appeal to consumers who pay those taxes considering the state levies 5.125 percent and cities and counties tack onto that. In Albuquerque it’s 7.3125 percent; in Bernalillo County it’s 6.25 percent. It comes close to 9 percent in some New Mexico municipalities, like portions of Española.

And that adds up fast for everyone who buys goods and services — up to almost 90 cents for every $10 spent.

So as legislation is crafted for the 2017 legislative session and as political posturing heats up, lawmakers should keep that goal of logical, fair and lower at the forefront of the tax reform debate.

Rep. Jason Harper, R-Rio Rancho, and other members of the interim Revenue Stabilization and Tax Policy Committee are putting together a tax package that would lower the state’s gross-receipts tax rate by closing more than 100 existing tax loopholes and deductions, and increase collections by encouraging online retailers to collect a gross receipts tax from New Mexico customers, as well as reinstating the food tax that was repealed in 2004.

Before the no-new-taxes howling starts:

New Mexico is perennially trying to compete with its neighbors in economic development as well as personal financial standing. Utah and Colorado have established systems that respect a recent Supreme Court decision yet encourage outof-state companies to pay Internet GRT.

Harper says at its core, “this is just really an issue of fairness. We’re sadly punishing the brick-and-mortar stores that are here by giving out-of-state-based online retailers an advantage.” As John Langell shuttered his family’s 67-year-old Albuquerque art supply business in 2012, he explained it had become hard to make money when his inventory “basically became an Internet showroom.”

The nonpartisan New Mexico Tax Research Institute estimates online GRT could bring in anywhere from $40 million to $100 million annually — helpful in the face of a $69 million budget shortfall.

Regarding reinstating the food tax, critics including Santa Fe Archbishop John C. Wester consider it an attack on the state’s poor. If the food tax had been repealed in a vacuum, or was to be reinstated in one, that might have some basis in reality — but that was not and will not be the case.

When the state stopped taxing food and medicine in January 2005, it continued to funnel commensurate payments to local governments to make up for their lost share of tax revenue. That means that for 12 years the state has taken money that could have been used elsewhere and instead shuttled it to municipalities to “hold them harmless” from the repeal.

Then, in 2013, municipalities were given the authority to raise their gross-receipts taxes as the hold harmless payments started a 15-year phase-out; several eagerly imposed their own gross-receipts tax increases that far outstripped what they had been receiving.

And so in 2016 the poor families the archbishop and others want to help pay no tax on bread and milk, but they pay much more tax on other necessities, including shoes and underwear for their children. Meanwhile the wealthy so-called 1 percenters pay no tax on their purchases of Kobe beef and lobster tails.

After the 2017 session, just as in 2004, federal regulation will prohibit taxing food purchased with food stamps — now called “SNAP.” And while those purchases are just a portion of a low-income family’s grocery bill, the fact they would be paying less for everything else they buy is an important offset to a reinstated food-tax. So is the low-income tax credit.

Harper says that “in isolation, as a stand-alone piece of legislation, I would be opposed to the food tax as well. But as part of a comprehensive package that includes fixes to a tax code that is strangling small businesses, it will ultimately reduce the tax burden of the great majority of New Mexicans.”

Reducing that tax burden by making New Mexico’s tax base wider and shallower, by getting more people to pay while requiring everyone to pay less, is logical and fair. It deserves serious consideration by lawmakers — and Gov. Susana Martinez — when the session starts Jan. 17.