SANTA FE, N.M. (AP) - New Mexico lawmakers began using information from a fiscal planning tool that predicts future tax revenues as they contemplate changes to the state’s complex taxes on sales and business services.
The Legislature commissioned the fiscal calculator for $400,000 from a consulting group to anticipate the consequences of tax reform on state government income, family finances and business interests.
Republican New Mexico Gov. Susana Martinez and allied Republican lawmakers pushed unsuccessfully this year for an overhaul of the state’s gross-receipts tax that would lower rates while eliminating hundreds in tax credits, deductions and exemptions.
New Mexico relies on the gross receipts tax for about one-third of its annual general fund budget - collecting about $2.1 billion to meet spending obligations of $6.1 billion.
Various lawmakers have balked at potential changes that would collect more taxes from nonprofit health care providers or reinstating sales taxes on food, while industry groups have warned of possible costly and unpredictable consequences for state government.
Consultants at with the Quantitative Economics and Statistics Group at Ernst and Young outlined several scenarios that would lower the state’s current gross receipts tax rate from just over 5 percent to as low as 1.4 percent, in a presentation Tuesday to a panel of lawmakers. Within weeks, the Legislature will be able to run its own analysis on proposed changes to gross receipts taxes and personal income taxes.
Republican Sen. William Sharer of Farmington expressed hope that the forecasting tool can help lawmakers move forward with reform efforts that can shield small businesses in particular from effectively paying taxes on gross receipts twice as they contract out accounting, legal, engineering and other services.
“I think this model will certainly give us some confidence going forward,” he said. “The reason we’re not doing anything is we don’t believe the numbers we are all seeing.”
Leading lawmakers say they’re unlikely to take up comprehensive tax reforms during the upcoming 30-day session in January and will focus on budgetary and public safety issues.
Legislators on Tuesday were concerned about proposals to do away with several deductions, including one for health care practitioners that shields $1 billion each year from gross receipts taxes. Republican Sen. Gay Kernan of Hobbs worried that eliminating the deduction would derail efforts to attract more physicians to the state.
An initial analysis of reinstating sales taxes on store-bought food shows lower-income families, earning from $15,000 to $40,000, would see the greatest tax increases as a percentage of income, though higher income families would pay more in dollar terms. Federal food subsidies to the poor cannot be taxed.
Those calculations reignited worries about tilting the state’s tax burden toward the poor, amid proposed reductions in corporate tax rates by the White House and Congress.
“Right now I’m a pretty hard ’no’ on the food tax,” said Rep. Bill McCamley, D-Mesilla Park.
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