“Tax Lightning” is a situation in New Mexico dealing with property taxes in which someone who buys a new home experiences a dramatic increase in property tax burdens because the property they are purchasing is no longer covered under the state’s 3 percent annual assessment increase. This situation was overturned yesterday by a judge who said that such unequal treatment was illegal. Read Albuquerque Journal article here .
The judge’s decision is definitely a double-edged sword. On one hand, taxpayers who stay in their homes for longer periods of time definitely benefit from the 3% tax cap which has now been ruled to violate New Mexico’s Constitution. So, doing away with the cap could increase all of our property taxes. On the other hand, if the Legislature places a 3% cap on all property, this could be a very good thing for New Mexico taxpayers. On the other hand, New Mexico faces a $300 million budget shortfall. Are legislators really going to forgo another source of revenue at a time of constrained budgets? Only time will tell.
If you want to know more about the demise of “tax lightning,” tune in to the Rio Grande Foundation’s radio show “Speaking Freely” from 9am to 10am tomorrow (Saturday). We’ll be discussing the issues with New Mexico’s foremost legislative expert on “tax lightning,” Senator Mark Boitano.