Lawmakers debate changes in NM's tax code - Albuquerque Journal

Lawmakers debate changes in NM’s tax code

In this file photo, the House gallery sits empty. at the Roundhouse. (Eddie Moore/Albuquerque Journal)

SANTA FE – An influential panel of legislators kicked around ideas for reshaping New Mexico’s tax code Thursday with the aim of improving the business environment while also stabilizing government revenue.

The ideas ranged from reimposing a tax on food, paying monthly tax credits to low-income families, raising property and gas taxes, and reducing the gross receipts tax.

Lawmakers also heard from national tax experts who offered mixed testimony on whether a 2003 change to the tax code – reducing the top income tax bracket, enacted under then-Gov. Bill Richardson – had the desired impact of promoting economic growth.

Randall Bauer of the Philadelphia-based PFM Group Consulting said the 2003 tax cut reduced tax revenue significantly, but there’s little evidence it changed economic outcomes.

“We don’t see a corresponding increase in economic activity,” Bauer said. “That would suggest that wasn’t necessarily a good move on your part.”

By contrast, Jared Walczak, vice president of state projects at the Tax Foundation, said he wouldn’t draw firm conclusions on the impact of the tax cut because of the complexity of the economy and difficulty assigning credit or blame for any particular policy change. Colorado, he said, cut taxes and saw economic growth.

Parts of New Mexico’s tax code, Walczak said, make it hard on businesses, such as the high gross receipts tax rate that increases the cost for a small business that wants to hire, say, an attorney to handle some legal work.

“Unfortunately, you have a tax structure that can make it very difficult to invest or expand investment in New Mexico,” Walczak said.

Overhauling the tax system is a perennial topic at the Legislature. Diversifying the economy and reducing New Mexico’s reliance on oil and gas taxes – a volatile revenue source – have been longtime priorities of Democrats and Republicans alike.

Members of the Legislative Finance Committee dedicated about three hours Thursday morning to presentations and discussion on tax policy. No consensus emerged.

Sen. George Muñoz, a Gallup Democrat and vice chairman of the LFC, suggested raising New Mexico’s relatively low property taxes could provide revenue to offset reduced gross receipts taxes.

House Speaker Brian Egolf, D-Santa Fe, said he hoped future tax changes could help entrepreneurs and startup companies.

Rep. Phelps Anderson, an independent from Roswell, said the flood of federal stimulus money makes the timing right for revising the tax code.

“The state is awash in cash,” Anderson said. “This is the time to do sensible consideration” of tax changes.

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