ALBUQUERQUE, N.M. — New Mexico maintained its ranking as having the 35th most competitive tax code in the nation, according to the Tax Foundation.
The foundation scored the state particularly competitive on property taxes, ranking New Mexico top in the nation, as it did last year, but poorly on its sales tax structure, ranking it 42nd, although that was up from 48th. Sales tax in New Mexico is levied as a gross receipts tax on business activity.
The foundation’s annual State Business Tax Climate Index, released Wednesday, takes into account more than 100 tax variables in five tax categories: corporate, individual income, sales, property and unemployment insurance. It is based on rates for the current fiscal year.
The foundation rated the state’s corporate tax structure at 25th, up two places from last year; its individual tax structure at 35th, down from 34th; and its unemployment insurance tax structure at 17th, down from 7th.
The ranking noted that New Mexico has been phasing in corporate income tax reductions, with the rate scheduled to drop to 5.9 percent by 2018.
This year’s most competitive states, according to the Foundation, were Wyoming, South Dakota and Alaska. The least competitive states were New Jersey, New York and California.
States are penalized for overly complex, burdensome and economically harmful tax codes and rewarded for transparent and neutral tax codes that do not distort business decisions, the foundation said in a news release.
“Our goal with the State Business Tax Climate Index is to start a conversation between taxpayers and policymakers about how their states fare against the rest of the country,” Tax Foundation Policy Analyst Jared Walczak said in the release. “While there are many ways to show how much a state collects in taxes, the Index is designed to show how well states structure their tax systems, and to provide a roadmap for improvement.”