The 60 day legislative session is in the books. Fans of public policy that would result in increased economic growth, an improved education system, affordable, reliable electricity, and rule of law were sorely disappointed by the 2023 session (if they had any expectations to begin with). But, we at Rio Grande Foundation had low expectations coming into the session. Even with those low expectations we were pretty disappointed by the lack of legislative focus on improving New Mexico’s business climate or prospects for economic growth.
You can read through the complicated legislative history of the tax omnibus HB 547 here.
We hoped for fundamental reform of the gross receipts tax “pyramiding,” but we knew that even this would be an uphill battle despite the State having a $3.6 billion surplus. Indeed, no actual plan was ever put forth among the numerous “omnibus ” tax bills to address the pyramiding issue, so we can assume that the Democrat-led Legislature never made that a priority.
Here is our take on what happened in the FINAL bill (we have commented on the several previous iterations). Our comments are (broadly) in order of the overall importance of the policies considered:
Lack of pyramiding reform, but GRT rates reduced 0.5 percentage points. Sadly, instead of taking effect next year the tax reduction will take effect over FOUR years. If that’s not bad enough if GRT revenue in any fiscal year after 2025 and before 2030 is less than 95 percent of GRT revenue from the previous fiscal year, the rate would snap back to 4.75 percent. New Mexico is in the midst of an unprecedented boom in oil and gas and SHOULD see continued growth, but there is no need for these “triggers,” especially when, as Rep. Christine Chandler noted, “delaying the full implementation of the GRT rate reductions for four years was necessary in order to pay for the film tax credits.”
It is hard to conceive of a more economically-misguided approach than to put broad-based tax relief on hold in order to throw more money at an already heavily-subsidized film industry. Under the new law SOME film projects will be reimbursed for a mind-blowing 40 percent of their overall spend.
The ONLY glimmer of real GRT reform is that at the last second a provision was inserted into the bill to eliminate taxation of deductibles and co-pays for medical care. This is something we have advocated for for many years. It represents some positive movement in the effort to address the doctor shortage.
More to come on the rest of the bill in the next few days.