“This is a matter of economic competitiveness,” he said.
Under existing rules, a manufacturer that expands or adds personnel in New Mexico gets a higher state tax bill, but if it moved jobs from here to Texas or Arizona, its New Mexico corporate tax bill goes down, he said.
Oddly, if the company lays off employees here, its corporate tax bill again would go down, he said.
New Mexico taxes manufacturers such Intel Corp. in Rio Rancho or Ethicon Endo-Surgery in Albuquerque on three factors: percent of sales here; percent of payroll here; and percent of property here. An average of those three then is used along with New Mexico’s corporate income tax rate to calculate the company’s tax bill.
Most states used to do it that way, but all but 10 to 12 have moved to a single sales factor approach and all neighboring states have either a single sales factor or no corporate income tax, said AED lobbyist Dick Minzner, who joined Tonjes for an interview at the Journal on Tuesday.
The Senate Finance Committee on Monday approved a tax package that includes a modified single sales factor. The sales factor would have both time limits and require companies to meet dollar thresholds to qualify.
“As it exists … it’s not really helpful,” Tonjes said.
The version in the tax package would require a minimum investment of $250 million – allowing a company two years of single sales factor reporting – and at this point would apply only to Intel.
But major manufacturers that would qualify, such as Intel, considering billions of dollars in capital expenditures cannot make such a decision with such uncertainty, he said.
Site selection experts for U.S. manufacturers considering expansion automatically cross New Mexico off their lists because of its three-factor approach, he said.
As manufacturers that are here consider their future, they are watching single sales factor developments, Minzner and Tonjes said.
Gov. Susana Martinez has indicated she could not support the tax bill as it was approved this week.
— This article appeared on page B1 of the Albuquerque Journal