New Mexico Receives Low Marks for Tax Climate Competitiveness

(TNS) — As New Mexico lawmakers put together to embark on a brand new tax overhaul try, some nationwide teams are giving the present state tax code low marks for its financial competitiveness.

The Washington, D.C.-based Tax Basis, a nonpartisan group, ranks New Mexico’s tax local weather because the twenty eighth greatest within the nation — behind all neighboring states — whereas one other group, the Council on State Taxation, stated the state has the nation’s highest tax burden on enterprise inputs, which embody labor and tools prices.

However some legislators stated Thursday the rankings mustn’t information the hassle to retool New Mexico’s tax construction amid an ongoing income growth, saying state-by-state variations in taxes and demographics make comparisons tough.

“I believe we have now to take lots of these so-called rankings with a grain of salt,” Rep. Christine Chandler, D- Los Alamos, informed the Journal throughout a break of the assembly of the interim Income Stabilization and Tax Coverage Committee.

As well as, Sen. Liz Stefanics, D- Cerrillos, stated components like a state’s inhabitants and common revenue ranges must be factored into tax rankings, however often aren’t.

For his or her half, officers with the nationwide tax teams stated the state’s poor tax rating largely stems from points linked to its gross receipts tax, together with tax “pyramiding” — or a number of ranges of taxes on enterprise companies.

However they did word that modifications permitted this yr, together with exempting some manufacturing provides and prices from double taxation, might enhance the state’s rating.

Whereas some enterprise leaders and legislators have pushed for extra sweeping steps to repair tax pyramiding, Chandler stated legislators ought to take a cautious method to the problem, stating the affect of the state’s 2004 meals tax deduction.

The exemption of meals and grocery objects from taxation prompted the state to pay cities and counties to offset their misplaced income streams, and tax charges have been elevated in some elements of the state after these funds have been finally phased out.

Whereas Chandler stated discussions of reimposing the meals tax is “not a excessive precedence”to her — and makes an attempt to take action would probably encounter fierce political opposition — she stated lawmakers ought to study from the previous when contemplating new modifications to the tax code.

“We have to have that dialog now,” she informed the Journal.

Nevertheless, some lawmakers stated the time is true for giant modifications to New Mexico’s tax construction given the state’s income bonanza that allowed lawmakers to approve tax rebates of as much as $1,500 for New Mexico households this yr.

“I am actually hoping we will do some important tax reform to make our state extra aggressive,” stated Rep. James Strickler, R- Farmington.

Strickler, who just isn’t working for reelection this yr, described New Mexico’s present tax code as overly sophisticated and stated it discourages enterprise exercise within the state.

New Mexico’s gross receipts tax system has already come beneath the scrutiny of lawmakers in recent times, as a mess of exemptions, deductions and different breaks enacted during the last a number of a long time have led to a rise in tax charges.

Whereas Gov. Michelle Lujan Grisham this yr signed a invoice that lowers the state’s base tax price by 0.25 proportion factors over the following two years, some cities nonetheless have total tax charges in extra of 8 p.c, together with Farmington, Santa Fe and Las Cruces.

Senate Majority Chief Peter Wirth, D- Santa Fe, stated decreasing the general gross receipts tax price could be more practical in making the state extra engaging to companies than approving new exemptions or carve-outs.

“We make progress on the coverage, however then we move a bunch extra credit and deductions and that is what’s consuming away on the base,” Wirth stated throughout Thursday’s listening to.

In the meantime, the legislative committee hearings this summer season are getting used to check tax points prematurely of subsequent yr’s 60-day legislative session, which begins in January.

And the gross receipts tax just isn’t the one sort of New Mexico tax that is drawing scrutiny.

Sen. Invoice Tallman, D- Albuquerque, urged Thursday lawmakers might take into account reducing the state’s private revenue tax charges, whereas concurrently growing the company revenue tax ranges.

And a few legislators identified New Mexico has one of many nation’s lowest property tax charges.

Whereas no particular coverage proposals have been endorsed by lawmakers but, Chandler stated further tax cuts or rebates will probably be on the desk given the state’s income growth that can turn into extra clear after new estimates are launched subsequent week.

“If these revenues are sustainable, then we must be pondering of some focused tax aid,” Chandler stated.

At A Look

New Mexico’s tax code received some optimistic marks — and a few adverse ones — within the nonpartisan Tax Basis’s 2022 report on states’ tax local weather for companies. Here’s a sampling:

• Total rank — twenty eighth
• Property tax — 2nd
• Company revenue tax — twelfth
• Private revenue tax — thirty sixth
• Gross sales taxes — forty first

(c)2022 the Albuquerque Journal (Albuquerque, N.M.) Distributed by Tribune Content material Company, LLC.