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Overhaul of State Tax System Proposed

SANTA FE — Republican lawmakers proposed Thursday to significantly revamp New Mexico’s governmental finance system by relying more on taxing people and businesses on what they consume and spend rather than the income they earn.

Rep. Tom Taylor and Sen. Bill Sharer, both of Farmington, outlined their proposal Thursday but conceded that it’s a work in progress and that it’s not fully clear how the tax burdens of individuals and businesses would change.

“It may overtax some areas, and we need to understand all of that before we cast this thing in stone,” Taylor said.

Sharer called it a “hard reboot of the New Mexico tax system.”

The proposal would greatly expand what is subject to New Mexico’s gross receipts tax, which applies to sales of many — but not all — goods and services.

Most groceries and food staples are tax-exempt currently, but that would end under the proposed overhaul. Sharer said the tax would apply to “virtually everything that happens” in the state.

By broadening the tax base, the lawmakers propose to reduce the tax rate and eliminate most other taxes, including the state’s corporate and personal income taxes.

However, income earned by individuals would be subject to what the lawmakers liken to a “consumption tax.” Corporate income would not be subject to tax under their proposal.

The lawmakers call for a 2 percent tax rate imposed by the state, and an additional 1 percent could be levied by cities and counties, which rely on gross receipts tax revenue to finance their operations.

The lawmakers said their proposal would keep severance taxes on oil and gas production, property taxes and taxes on gasoline, which help finance roads.

An economist for a social advocacy group said the proposed changes likely would make New Mexico’s tax system more regressive and potentially move a greater share of the overall tax burden to individuals and away from businesses.
— This article appeared on page A6 of the Albuquerque Journal