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The underlying theme of the 2012 legislative session was taxes, specifically the issue of tax reform. Gov. Martinez put the gross receipts tax on the agenda with her proposals to both exempt certain small businesses from the tax and to reduce the incidence of “pyramiding” which forces businesses and consumers to pay taxes on top of taxes in this state. $40 million of welcome tax relief was included in the budget, but issues remain.
Senate Finance Committee Chair John Arthur-Smith made a dramatic point with the introduction of legislation that would have eliminated New Mexico’s gross receipts tax entirely.
Smith’s point is that New Mexico’s gross-receipts tax has come to resemble Swiss cheese. Too many loopholes have been added to the tax over the years, thus driving rates on the robust gross receipts tax upward. The tax is now charged at rates rivaling sales tax rates in many states.
So, why not just get rid of the tax and go to a straight sales tax, thus eliminating “tax pyramiding”? This would be an ideal solution, but New Mexico is heavily-reliant on the federal government’s massive presence here and doing so would result in massive revenue losses to the state.
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