Don’t think taxation matters?

Here at the Rio Grande Foundation, we talk a lot about tax policy and the fact that New Mexico’s policies tend to be relatively unfriendly to entreprenuers and business activity in general. Unfortunately, while New Mexico trails its neighbors in most economic indicators, the average person often does not make the connection between overall economic conditions and tax policy. In at least one instance, that is changing.
As the Albuquerque Journal reported this week, the Legislature is now considering whether to exempt concert tickets from New Mexico’s gross receipts tax. The reason for the potential tax cut? The number of concerts being held at the Pan American Center in Las Cruces has declined by 60 percent since Texas ended its tax on most events. Thus, while New Mexico may be charging only a dollar or more per ticket in taxes, for a concert promoter, that can be $25,000 in forgone profit on $500,000 in ticket sales.
Some might say that even $25,000 is not much money for a “rich” promoter, but a good businessman would be a fool to pass up $25,000. So, is eliminating the ticket tax a good idea? Maybe, or maybe not. The point is that every time we raise taxes — or forego opportunities to cut them — businesses and consumers make real-world decisions as far as where they want to spend their money. This has had a serious impact in stunting economic growth in New Mexico.