• Fact Sheet on the Food and Medical Service Gross Receipts Tax Deduction

Public policy involves choices.  Exempting food from the gross receipts tax will result in the loss of $122million in government revenue.  The resulting tight budgetary condition may force policy makers to make expenditure cuts in programs that benefit the poor or that promote state economic development.  The state may be unable to afford economic development incentives which target tax relief to private businesses and thereby expand the state’s future tax base.  Or the state may have to raise revenue through new or increased taxes on income, property, and gross receipts.

• Fact Sheet on the Reduction of Personal Income Tax Rates

Where the states really display their individuality is in their tax rate schedules. Colorado imposes a flat tax of 4.63%; Colorado taxpayers face the same rate no matter how high or low their income.  Oklahoma lets its taxpayers compute tax under two different rate schedules, tax due being the lower of the two calculated amounts. Tax due in California is the lowest or second lowest up to about $80,000married filing jointly (MFJ) but the highest for very high income taxpayers. In 2002 New Mexico’s rates are among the lowest at low income levels but effectively second only to California’s for high income taxpayers.

• Testimony on Tax Incentives

The effectiveness and costs of state sponsored economic incentives have been debated by scholars, politicians and business people for some time.  Although most, if not all, states offer an array of incentives to promote economic growth, the effectiveness of these incentives is the subject of some controversy.  Some argue that incentives competition among the states is a “race to the bottom”.  Others point to successful recruitments of job producing businesses and say that the incentives were the reason for the success.  However you may feel about the efficiency and effectiveness of incentives, it is true that the discussion is often settled with the observation that “everybody does it and we have to compete”.  Court decisions and federal legislation will change this landscape soon.

• Testimony on Tax Litigation

Two cases are currently pending before the Supreme Court of New Mexico.  The general issue presented for decision in both KMart and Sonic is whether or not the New Mexico Gross Receipts Tax, not the Compensating Tax, is applicable to a sale of an intangible right, a license, for use in New Mexico when the sale occurred outside of New Mexico.  If the decisions of the lower tribunals are affirmed, these cases are probably headed to the United States Supreme Court because they involve a significant issue regarding the ability of the State to apply its in-state tax to transactions that occur outside the State of New Mexico.

• Testimony on Tax Expenditures Budget

A tax expenditure budget is a document that is intended to be a useful source of information that will allow the legislative body to subject indirect “expenditures” of public resources to the same degree of scrutiny as direct expenditures of public funds.  The major issue, of course, is the determination of the standard against which these expenditures are measured.  More than 60% of the states use such a document in some form.  Would a tax expenditure budget be useful in New Mexico?

• Property Tax Comparison Study

New Mexico’s property taxes are low. But the truth of that statement depends on the details.  In some instances, maybe we are not as low as is presumed. The study examines these details as to taxes imposed by size, classification and location of property. The effective tax rate paid by taxpayers within in New Mexico is, in fact, different based on these factors and in some cases higher than our neighbors. Once the differences in effective tax rates are revealed, do they make any difference in people’s behavior?

• Pyramiding of the Gross Receipts Tax Study

Paying tax on purchases of business inputs that produce taxable sales, “pyramiding”, is still an issue in New Mexico.  The tax on business inputs produces almost 750 million dollars annually for the state and impacts different sectors of the New Mexico economy differently. Pyramiding of transaction taxes happens in every state, but the issue may be more acute when the tax base is broad, as the base is in New Mexico.  

_______________________________________________________________________________________________________________________