INSIGHTS: TAX REFORM KEY TO NEW MEXICO ‘NEW DEAL’

RIO RANCHO, N.M. — New Mexico municipal leaders took heart from Gov. Michelle Lujan Grisham’s first proposed state budget along with early versions of state tax reform, which fueled hopes of a “New Deal” that would enable cities to advance more rapidly toward fiscal self-sufficiency.

Local progress could in turn “tip” New Mexico’s economy toward parity with neighboring states that now enjoy stronger growth and quality of life. Those hopes are now hanging by a thread, compounding the wounds inflicted on cities by ill-conceived state tax policies over the last 15 years.

Drastic cuts in municipal funding began in 2003 with a repeal of local gross receipts tax (GRT, or sales tax) on food and medicine.

That cut was only partially offset by so-called “hold-harmless” state payments to local government. But there has been a growing gap in net state funding to cities, especially since the state unexpectedly began in 2013 to phase out hold-harmless payments altogether by 2030.

At that point, Rio Rancho was scheduled to receive $8 million less annually in state revenue than it does today.

Now, insensibly in a revenue boom year the state proposes to move municipal revenue Armageddon forward from 2030 to 2022. Fiscal analysis on the hold-harmless early sunset, and the revenue impact on city budgets of other proposed tax changes, is all over the map.

The state is gambling with local communities’ futures.

It’s almost as if the state legislature by keeping cities, towns and villages on their knees is keeping alive New Mexico’s notorious “patron system” that once flourished under leaders like Gov. Bill Richardson.

It is not enough for the state’s boom-and-bust oil and gas industry to intermittently and unpredictably inject new revenue into the state budget to in theory would “trickle down” to local governments. That’s especially true when much of the cyclical bonanzas end up in an over-the-rainbow permanent fund that is religiously guarded by fiscal conservatives.

Now, on the cusp of rising above “banana republic” status, New Mexico is ripe for a New Deal that couples government investment in education and economic development with statewide tax reform that empowers local communities to succeed on their own. Toward that end, the New Mexico Municipal League has offered a local tax reform template that includes:

• Giving New Mexico cities a revenue boost from taxes on internet sales — a boost already given to the state by itself.

• Reinstating a limited local tax on food and medicine. Some small communities have been forced to raise their GRT rates above 9 percent, snatching back the supposed benefit to residents from food/drug tax repeal.

• Providing a stream of personal income tax revenue to local governments.

Those “New Deal” steps could push New Mexico up from the bottom of so many “quality of life” rankings. State legislators should push aside partisanship, balance out differences and enact a fair tax code that serves all New Mexicans and their local communities.

(Cheryl Everett is a Rio Rancho resident and former city councilor.)

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