If the state of New Mexico wants to get back on solid financial footing it has to take on some sacred cows, according to Sen. Ron Griggs. Griggs, a Republican who is the former mayor of Alamogordo, calls the omnibus tax bill he is sponsoring the start of that conversation. The bill not only brings back the gross receipts tax on food and medicine — albeit at a lower rate — but it raises the fee to transfer ownership of a motor vehicle and imposes a new fee to transfer or refinance real estate. Senate Bill 343 would also reduce the corporate income tax, eliminate taxes on interest income, which would benefit retirees over 55, and help cities and counties with their budget challenges. Large, complicated tax measures have not always fared well in the Legislature.
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.
Crafting this year’s state budget will be a challenge and some long-held assumptions and principles will be tested. That was the message from Sen. John Arthur Smith, the famously fiscally conservative and pessimistic chair of the Senate Finance Committee, as he gave a short preview of the budget on Monday morning. The Deming Democrat spoke on the Senate floor, just two days after the House passed their version of the budget. His committee will now begin the review of the budget. “We’re real concerned about getting through the fiscal year we’re in,” Smith said.
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”]DON SIMONSON, PhD. is an Emeritus Professor of Finance at the University of New Mexico and the Treasurer for the Board of Directors of New Mexico Voices for Children. [/box]
The notion of “paying it forward” is a popular one, and while we may not think about our income taxes as a form of paying it forward, that’s exactly what we’re doing. The public works that we all depend upon today—roads and highways, schools and parks, telecommunications and electrical grids, even courts and prisons—were made possible in part by taxes paid by past generations. And the taxes we pay today won’t just go toward keeping these systems and infrastructure in good repair, they will also be needed to plan for our future and address unexpected issues and opportunities. This kind of long-term vision is the foundation upon which the United States was built.
Our public works and infrastructure don’t just improve our quality of life, they also make our modern economy possible.
[box type=”info” style=”rounded”]BILL JORDAN is Senior Policy Advisor/Governmental Relations for NM Voices for Children. He can be reached at firstname.lastname@example.org.[/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?