New Mexico is known for going it alone, often with negative results. For example, take the recently struck down cap and trade regulation imposed during the Richardson administration.
New Mexico is the only Western state with a corporate income tax that doesn’t require big businesses that are based in another state to file corporate taxes here using “combined reporting.” That means such corporations would have to combine earnings from all of its subsidiaries, regardless of location, and pay New Mexico corporate income tax based on a portion of its combined earnings. Businesses now have the option of filing state taxes on income related to in-state operations or on its combined corporate income.
Proponents of combined reporting say the current code allows corporations to shift income to states with lower tax rates to reduce liability. For the past few years, legislation to change what proponents call a tax loophole has been introduced but has failed to pass.
This year’s version, SB 9, sponsored by Sen. Peter Wirth, D-Santa Fe, would lower the top corporate tax rate from 7.6 percent to 7.5 percent, to offset the requirement that more corporations pay taxes to the state. The bill was amended so that only “big box” retailers — stores of more than 30,000 square feet under one roof — would have to file with combined reporting.
Opponents have argued the change would discourage big businesses from locating in New Mexico. However, amendments adopted this year address that, for instance, by exempting manufacturers like Intel. In fact, it targets retailers like Walmart and Target that will locate here in any case because there is a customer base for their products.
If the change will lower corporate income taxes across the board and make the tax code more equitable, it merits serious — and nonpartisan — consideration.
This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.