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Taxes are complicated and difficult, except when they are simple.
The observation comes in the wake of my annual chat with the tax lady and the end of the legislative session.
Like most topics, taxes are simple at the big picture, the most general.
In the tax world, three main areas offer themselves as targets for being taxed: property, sales and income. For income, corporations and people are taxed separately.
In New Mexico, even at the most general, tax concepts are more complicated. That’s to be expected. Everything seems more complicated here, disrupted by the magic dust of enchantment.
Our tax complication is an added broad category for taxation—the extractive industries whose royalties are the source of the permanent funds.
The decision is not what to tax, the decision is how to allocate the taxation among the general categories. Richard Anklam of the New Mexico Tax Research reminds us that over the years New Mexico has made two unusual tax allocation decisions. We rely heavily on sales taxes, using a variant called gross receipts taxes. Also, our property taxes are low, just about the nation’s lowest, and are all imposed locally.
I hate gross receipts taxes because we pay a little at a time. We don’t really notice the tax because it is part of the landscape. The property tax bill arrives once a year as a big number that gets people’s attention.
During the session, Anklam says in his newsletter, the Institute “tracked around a hundred tax- and significant revenue-related bills this session. Ultimately, only 14 passed.” Find the newsletter at www.nmtri.org. Anklam summarizes the bills and links to the Legislature’s website.
Some were about as special interest as is possible. There was a five-year extension on the exemption for paying gross receipts taxes on concerts at the Pan Am Center on the New Mexico State University campus in Las Cruces. House Bill 23 will cost the state about $80,000 annually.
Senate Bill 19 from two Taos County legislators, Sen. Carlos Cisneros of Questa and Rep. Bobby Gonzales of Taos, allows a governing body to reimpose a county education gross receipts tax without voter approval. The governing body in question was carefully defined so as to only govern Taos County. Should someone in the area become extra annoyed at the high handed behavior, this bill looks to me like the basis of a campaign against the legislators.
Complications with taxation develop when elected officials mess with the general tax principles of creating minimum harm, and being understandable, fair, equitable, and cheap to administer.
For non-New Mexico companies, the gross receipts tax provides a major complication. It is different from nearly all sales taxes. So a company considering locating in New Mexico must incur the added cost, to start, of understanding the tax and, once here, incur the cost of dealing with the tax.
Companies start in New Mexico mostly because the founders live here. Few, I believe, say, “I want to start a company but I will do it somewhere else.” Eventually those firms that grow, those that are truly entrepreneurial, have the opportunity to consider place as part of the future.
For both sets of companies, cost will drive the decision, just as it does for nearly all location decisions. And for both sets of companies, New Mexico loses.
Meanwhile those companies in New Mexico deal with higher costs. So must their customers.
Solving this, really solving this, would be difficult. Politics becomes the next problem. Politics hides from the difficult.
Instead we fiddle. Change this or that little thing and benefit the brother or friend of the elected official. Pick this or that winner. While we fiddle, New Mexico burns.
New Mexico News Service