It turns out Roundhouse fears that the gross receipts tax overhaul proposed by Rep. Jason Harper would have significant “unintended consequences” on state operating revenues were overblown, according to the latest analysis of House Bill 8.
The estimate was a $30 million to $44 million deficit in general fund operating revenue. However, with a few wording fixes, the legislation would have come between $3 million to $16 million of being revenue neutral. And, that doesn’t take into account the estimated additional $41 million that would go into the road fund courtesy of an increase in the excise tax on vehicle sales. Throw that in and it’s virtually revenue neutral even without the tweaks.
Hardly the harbinger of fiscal doom many had predicted.
This was the latest Legislative Finance Committee analysis of Harper’s House Bill 8, which outlines an extensive revamping of the state’s gross receipts tax system.
The legislation by Harper, R-Rio Rancho, would have trimmed the roughly 130 existing tax breaks by about 100, and lowered the gross receipts tax rate overall.
The bill also seeks to eliminate some of the worst parts of “pyramiding” taxation, the business-to-business taxes that drive up the cost of goods and services for consumers. The burden weighs heavily on small businesses.
The overall goal is to develop a simpler, revenue neutral taxation plan for the state that’s more business-friendly and reduces reliance on the volatility inherent in the state’s heavily oil and gas-dependent revenue streams.
The LFC analysis said Harper’s bill, with a few wording fixes, would have come close to that goal during the fiscal year that begins July 1.
And that’s without legislators summoning up the political will to reinstate the GRT on food – which would leave poor people better off because it also would lower overall GRT, raise the low-income tax credit and exempt SNAP purchases.
The LFC analysis also said HB 8 would have produced new money for sorely needed road projects statewide. The report estimates the bill would have funneled an extra $41 million next year into state and local road funds by increasing the excise tax on motor vehicle sales from the current 3 percent to 6 percent.
Part of the new revenue would also help lower the overall gross receipts tax rate and some new money would have gone into a tax stabilization reserve fund that could be used to shore up the general fund.
Having missed the opportunity to finally fix the gross receipts tax system in both the regular and special sessions – a system likened to Swiss cheese for all the holes caused by tax exemptions – lawmakers’ fallback was to fund a $400,000 study of the system, the results of which are expected sometime in the fall.
Perhaps that study will finally convince legislators that our broken GRT system really is fixable if they can lay aside partisanship and make a few tough choices.
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.