RGF Op-ed: Proposed Las Cruces GRT hike regressive, unnecessary

The following appeared in the Las Cruces Sun News in August 2024.

In what can only be described as a “tone deaf” move the Las Cruces City Council recently adopted a proposed ballot measure (to appear on City voters’ ballots this November) to decide whether to increase the City’s gross receipts tax (GRT) rate by .5625% from the current rate of 8.0625% to 8.625%.

Las Cruces’ GRT is currently higher than either Albuquerque’s or Rio Rancho’s and will exceed Santa Fe’s (if the tax is adopted). More pressing is the fact that the proposed GRT increase would put Las Cruces’ rate above that of nearby El Paso (which has a sales tax rate of 8.25%).

Albuquerque’s rate is 7.6250%

Santa Fe’s is: 8.1875%

Rio Rancho is: 7.4375%

Let there be no doubt: the tax hike being voted on is massive. Of the various components (state and local) that make up gross receipts taxes in New Mexico, Las Cruces currently taxes its citizens at 1.5625% (the state rate is 5.0% while the County is 1.5%). That means the City is requesting a 36% tax increase for Las Cruces government. The City’s general fund budget just grew by an annual rate of nearly 10 percent in the latest budget.

It is hard for anyone to justify such a tax when the State has been piling up multi-billion-dollar surpluses every year. The mayor claims the money raised by this tax hike will be used for “critical infrastructure and public safety initiatives.” Why not ask Santa Fe to fund some of these items with a tiny portion of the State’s massive budget surpluses which have clocked in at $3.5 billion annually in recent years? There is also no “sunset” on this tax. If voters endorse it in November, they will be paying much higher taxes for years to come.

It’s not as if the gross receipts tax isn’t harmful. For starters, the GRT is a “regressive” tax which hits the poor hardest. It is hard to justify raising taxes that impact the poor, but that especially true when inflation continues to have a serious, negative impact on businesses and residents alike.

Speaking of businesses, it is well-known that the GRT applied in New Mexico cities like Las Cruces hits small businesses in ways that El Paso’s sales tax doesn’t. For example, in New Mexico contracting with an accountant, bookkeeper, and even buying advertising in your local newspaper are taxed. Up until 2023 doctors were taxed on deductibles and copays. The Las Cruces GRT taxes many items (especially those used by small businesses) that are simply not taxed in El Paso.

An honest assessment of the situation makes it hard to believe that this tax hike is necessary or justified. Will public safety really improve in Las Cruces if this tax hike is approved or are the politicians just using that to justify the increase?

After all, when presented by Gov. Lujan Grisham, a “progressive” Democrat, with an opportunity to improve public safety statewide, Democrats in the Legislature refused to act. This inaction drew the ire of Lujan Grisham who wrote, “The Legislature walked away from their most important responsibility, keeping New Mexicans safe.” For their part Republicans blamed crime issues in New Mexico’s cities on the unwillingness of liberal big-city mayors to enforce the law.

Clearly, crime is a complicated issue and with the City’s recent budget including robust growth it is hard to see how more money alone will improve the situation.

Las Cruces residents would be foolish to give city government a blank check in the form of a 36% tax increase this fall. The Rio Grande Foundation will be doing our level best to make that case between now and November.

Paul Gessing is president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility