Delaying or freezing corporate income tax cuts and across-the-board budget cuts are two of the most popular proposals for bridging the state’s large budget deficit. That comes from a poll conducted by Public Policy Polling for NM Political Report. Respondents were asked to choose from a list of five options for balancing the budget. The options were “Delaying or freezing corporate income tax cuts,” “bringing back taxes on food and medicine,” “increasing the state gasoline tax,” “cutting education spending” and “enacting across-the-board spending cuts.”
After choosing their top choice, respondents were also asked to choose a second-best option from the same list. In both cases, respondents saw delaying incoming corporate income tax cuts delay and enacting across-the-board spending cuts as the two most popular choices.
A working paper that examined state tax codes and their effects on income inequality found that New Mexico, along many other states, has a tax system that tends to work against federal efforts to mitigate or reduce income inequality. The study comes from three staff economists with the Federal Reserve and looked at whether tax systems in each state helped the federal tax system to mitigate income inequality or if the state tax systems countered these efforts. The federal tax system tends to lessen inequality since it has a progressive tax system based largely on income taxes. States generally rely on sales taxes which are more regressive; New Mexico relies heavily on a Gross Receipts Tax. New Mexico’s GRT is known as a regressive tax that is a relic from the 1960s, when the state sought to tax activity from the federal government, which had a very large presence in the state but could not be directly taxed.
[box type=”info” style=”rounded”]BILL JORDAN is Senior Policy Advisor/Governmental Relations for NM Voices for Children. He can be reached at email@example.com.[/box]
Since the legislative session concluded without the passage of a capital outlay bill—money for public works projects like building community centers—there have been rumblings about the need for a special session. Amid this din, the Executive Office has indicated that it would also want tax cuts to be considered. A special session should be called, but the Legislature should limit their agenda to passing the public works projects and not even consider handing out more tax breaks. How much more evidence do we need that tax cuts are a failed economic development strategy?
A bill that would drastically change the tax system in New Mexico by repealing nearly all taxes in the state and replacing them with a low gross receipts tax with no exemptions was introduced by a Republican Senator on Wednesday. Sen. Bill Sharer, R-Farmington, called the bill “a hard reboot of our tax system” ahead of the bill’s introduction. He described a tax system so full of exemptions and carve-outs that it now makes up over 1,000 pages. His 228-page bill, Sharer said, is much simpler. The proposal would eliminate most other taxes and replace them with a small gross receipts tax — up to two percent, with the total going to fund the state government at one percent.