Two important questions: Where does New Mexico rank in base tax burden on new business investment and job growth among the 50 states and the District of Columbia?
Dead last — meaning the heaviest tax burden — according to a 2011 study by respected accounting firm Ernst & Young.
The second question is: Why should you care?
The simple answer is: Jobs — jobs that make it possible to take care of your family. And the businesses that provide these jobs also pay business taxes that help keep our roads fixed, our water mains flowing and our libraries, parks and pools open.
But when business profits go down, we have less tax revenue to meet our city’s needs. To make matters worse, our current state business-tax burden is a business-killer.
Consider how we stack up against our neighbors: New Mexico’s overall tax rate (excluding incentives) is the highest, at 15 percent, with Oklahoma next at 11 percent, and Texas weighing in at 10 percent. If you were a business owner, where would you want to locate or expand?
To add insult to injury, some businesses pay virtually no state tax — they’ve got lobbyists in Santa Fe who make sure they benefit from more than 400-plus tax deductions, exemptions and credits. The mom-and-pop shops and local businesses that have small workforces, and are the backbone and engine of a strong economy, are the ones that feel the full, crushing weight of our state’s unfair tax policies and pay more than their fair share.
When appointed to the Taxation and Revenue Stabilization Committee, I was frustrated to find out that after 30 years of the state Legislature adding incentive after incentive, our state tax policy now looks like a block of Swiss cheese. Every new loophole we cut out adds even more to the already-breaking backs of small business.
So, what can we do about it?
We’ve already made a good start. During the last legislative session, the largest tax reform bill in three decades was passed and signed into law by Gov. Martinez. This new law decreases the corporate income tax rate over a five-year period from the current, extremely high 7.6 percent (only California is higher) to a slightly- above-average 5.9 percent. This is a huge step in the right direction.
On the local front, like many of you, I have been following with great interest the debate in Rio Rancho on how to address the city’s budget woes. Rio Rancho is not alone — much of New Mexico is suffering from poor roads and failing infrastructure. Much of the discussion has centered around which taxes to raise and by how much.
But raising local taxes is just a quick (and painful) short-term fix. Rio Rancho is already one of the most taxed regions of the state. In the long run, raising taxes will have the opposite effect — businesses will leave Rio Rancho, consumers will go down the hill to shop and our city’s tax revenue will go down.
What we need to do is completely overhaul New Mexico’s tax structure. I’m happy to report that I’m working with a bipartisan group of reform-minded legislators to do just this.
The goal is to undo decades of special interest carve-outs and make state taxes fair, uniform, simple and low. I’ll continue to fight for tax reform so that our state’s — and city’s — economy can grow, quality of life will improve, and our kids and grandkids won’t have to leave their families and fair New Mexico in order to find a decent job.
Now that’s what I call a bright future.
(State Rep. Jason Harper, a Republican, was elected in 2012 to represent District 57, which includes part of Rio Rancho.)