Talk is again heating up in Santa Fe over potential reform of New Mexico’s broken gross receipts tax. The Albuquerque Journal has a write-up in today’s paper. For it’s entire history, the RGF has focused attention on what we’ve called “the original sin” of New Mexico tax policy. Here is one of many reports we’ve written on the issue.
As the Journal correctly notes, over the years GRT rates have risen while in some ways the “base” has been narrowed (with fewer items being taxed).
Unfortunately, with “progressives” in charge, the main focus of “reform” (if indeed Democrats finally decide to address the GRT) will likely be on pushing more of the burden onto high income New Mexicans rather than addressing the actual harm of the tax.
Here are a few basic principles to consider in the GRT reform discussion:
- Any reform must address the harm done by taxing business inputs and services (bookkeeping, accounting, web management, doctors, and many more). Any “reform” that doesn’t address most or all of these isn’t really reform (See HB 6 in 2019). The “base” was also broadened in 2019 with taxes on Los Alamos National Lab and certain health care items imposed as well as taxes on certain online sales;
- New Mexico is swimming in tax revenues and has raised taxes multiple times in recent years (also SB 317). The bill should be revenue-neutral or even a tax cut regardless of whether the GRT’s “regressive” nature is addressed or not;
- Ideally the Legislature would put some kind of protections into the Tax Code to both make it more difficult for local governments to raise rates AND for the Legislature to provide one-off tax breaks for special industries. That may be a challenge, but it is worth considering so we don’t wind up in this situation again.