Extend logic of GRT on medical services to broader economy

During the 2023 legislative session, the ONLY significant permanent tax reform signed by Gov. Lujan Grisham involved the elimination of taxes on certain payments to medical professionals.

The elimination of this tax was a long-time priority of RGF and we are glad to see it eliminated. Previously during the Richardson Administration the GRT on health insurance payments to medical providers was eliminated.

Clearly, policymakers understand that taxing services is economically-harmful. But what about the impact of taxing services on the rest of the economy? During the last legislative session Gov. Lujan Grisham and at least some legislators supported reform. Unfortunately, the bill died due to concerns over lost revenue on the part of local governments.

When grocery taxes were ended during the Richardson Administration “hold harmless” payments were made to local governments to fill the gap.  Unfortunately the process of “unwinding” these payments was very messy resulting in some local governments (like Albuquerque) dramatically increasing revenues an others losing out.

• • The State has plenty of revenue right now to reform the GRT;
  • The GRT (especially service taxation/pyramiding) is New Mexico’s “original sin” of economic policy;
  • Eliminating the grocery tax while a “done deal” was a bad policy move for a number of reasons including the increasing of GRT rates by 0.5% and the “hold harmless” debacle;
  • Reforming the GRT should be a much higher priority, it can be done at a much lower “cost” and potentially with a better approach than was undertaken in the past.