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Report: Rising tax protests pose ‘sizable risk’ to budget

SANTA FE, N.M. — The number of people and businesses protesting their taxes has created “sizable risk” to New Mexico’s general operating budget, nonpartisan legislative analysts say.

A report released Monday estimates that over $440 million in taxes are under protest now by taxpayers who have had their refunds denied or are otherwise challenging their tax bills.

If even one-third of the protests prove successful, analysts said, the state’s general fund could take a hit of roughly $147 million, or about 2 percent of the $6.1 billion budget.

New Mexico is expecting a thin budget next year. A revenue forecast released in August estimated the state would have only $25 million in new revenue above this year’s spending levels.

John Monforte, acting secretary of the Taxation and Revenue Department, said his agency is performing well within its budget constraints.

“Overall, we are doing more with less,” he told lawmakers Monday, “and I think we are doing that very well.”

Rep. Jason Harper, a Rio Rancho Republican who has pushed to overhaul the state’s tax code, thanked the department for its work.

“I’m impressed with what you’re able to do with what you have,” Harper said Monday during a meeting of the Legislature’s Revenue Stabilization and Tax Policy Committee, where the report was presented.

The nonpartisan analysts noted that tax protests are a normal part of tax collection – a way for taxpayers to challenge their assessments and ensure they’re treated fairly.

But there’s been significant growth in the amount under protest, the report said.

“Industry analysts have expressed concern over the amount of refund denials resulting in protests, creating backlogs and delaying revenue collection by” the state Taxation and Revenue Department, the report said.

The report also says understaffing in the department – among both leadership and front-line jobs – could hamper efforts to collect revenue owed to the state. Twenty-one percent of the department’s positions are vacant, an official said.

Sen. John Arthur Smith, D-Deming, said the Taxation and Revenue Department simply needs more employees to handle its work, a condition that’s stretched through several administrations.

“We need resources in the department,” he said.

Responding to the legislative report, Ben Cloutier, a spokesman for the department, said the agency has “made significant progress to improve revenues, and our department will keep doing all we can to be responsible stewards of taxpayer dollars – while working to protect the tax reforms that are lifting up our families and businesses.”