Gross receipts tax reform enacted this year significantly improves New Mexico’s business tax competitiveness, but corporate income tax reform should be on the top of state government’s list of things that need doing, a tax expert told the Economic Forum on Wednesday.
“With respect to corporate income taxes, we’ve done nothing,” said Richard Anklam, director of the New Mexico Tax Research Institute. “We’ve been stagnant for 20 years. Other states have made changes.”
Implementing a single sales factor regime for corporate income taxes could lower some manufacturers’ taxes by as much as 90 percent, he said. Other states have used single sales factor successfully to recruit companies.
Single sales factor bases corporate income taxes on how much of a firm’s product is sold in the state. Manufacturers that export to other states benefit from the regime.
Describing a study of tax competitiveness released in February, Anklam said that after tax incentives, New Mexico ranks about in the middle of nine Western states studied. However, the new law that exempts inputs to manufacturing processes, such as electricity, from GRT will reduce the effective tax rate on some manufacturers by almost half.
Anklam said New Mexico applied the highest effective tax rate among the nine states to computer manufacturers. GRT reform makes New Mexico’s the second-lowest effective tax rate for the industry, he said.
The new law gives economic development professionals a better argument to use when recruiting businesses to New Mexico, said Albuquerque Mayor Richard J. Berry.
“We all agree we can be more competitive, but where there is something we can sing about, we should sing,” Berry said in an interview.
— This article appeared on page B1 of the Albuquerque Journal