Rewriting and simplifying the tax code in New Mexico has been on the agenda of state legislators for years. For businesses in particular, the gross receipts tax laws are onerous and in desperate need of an overhaul. But yet again, we have come through another year without a successful tax bill, and according to an article by Bruce Krasnow recently published in the Santa Fe New Mexican, we should not expect one in 2018 either.
As we enter an election year, Democrat legislators are unlikely to pass any tax bill which Governor Susana Martinez could claim as a victory – which at this point means any tax bill at all. However, neither is Governor Martinez willing to bend on passing tax reforms, since she refuses to do anything to the tax code without an omnibus bill. Bruce Krasnow writes:
“The lack of a comprehensive fix to the state’s jumbled tax policy has put efforts to amend specific measures on hold. Smaller or stand-alone bills to charge the gross receipts tax on out-of-state internet sales, or tax nonprofit hospitals have been vetoed by Martinez. She has said she will not sign stand-alone tax bills into law without comprehensive changes.”
Representative Jason Harper (R – District 57) has a comprehensive tax reform bill which failed to move forward in 2017, but which he wishes he could put forward in the coming session.
Harper said the governor’s support has now become a detriment as she enters her final year in office. “I’m still pursuing reform, but I’m not naive,” Harper said. He said he plans to introduce what he calls “tax-reform junior,” which will focus on a few areas of the tax law. But according to Harper it won’t provide the benefits of lowering the overall gross receipts tax rate, which has been a detriment to business growth and economic development.
Harper is still working with colleagues to identify the key elements of a streamlined bill, but says it has not yet been drafted. A spokesman for the governor said both Wirth and House Speaker Brian Egolf, D-Santa Fe, said they would support a broader tax reform effort during a regular session after completion of the study.”
Impact on New Mexico Businesses
The present gross receipts tax system is a thorn in the side of New Mexico business. While legislators argue about its impact on out-of-state purchases and what to do with the money once it is in the government’s hands, smaller businesses that largely operate within New Mexico are left with accounting and cash-flow troubles. Troubles that are unnecessary and costly, reducing opportunities for growth.
The political maneuvering happening around this issue hurts businesses at a time when we have great opportunity for growth. The recession is over. The economy is picking up speed. Governor Martinez and the legislators on the Revenue Stabilization and Tax Policy Committee need to remember that business does not halt for politics, and small business owners like myself are still losing time and spending power.