Gross Receipts Tax Mess

The Rio Grande Foundation loves “teachable moments” in tax policy and that is exactly what happened recently as the New Mexico Senate passed a bill to exempt certain non-athletic events from the state’s gross receipts tax. According to a press release from Senator Rawson’s office: “The Pan American Center at NMSU is having difficulty competing for headliners now that it has competition from the Don Haskins Center at UTEP in El Paso where there is no sales tax for the concert tickets. We want the concert business and all non-athletic entertainment to be in New Mexico, and not go across the border,” So, “In order for the Pan American Center in Las Cruces to have any significant impact in the non-sporting events venue, the tickets need to be exempt from the state’s gross receipts tax.”
Simply put, taxes do matter. As Dr. Messenheimer pointed out recently, given the very real impact of New Mexico’s gross receipts tax — Las Cruces levies the tax at 7.125 percent — even a small rate increase can have a big economic impact. Unfortunately, as innocuous as exempting certain activities from the gross receipts tax may seem, these efforts invariably lead to higher taxes on other economic activities.