The best state sales tax systems (or gross receipts tax, as it is called in New Mexico) are broad, low, and don’t tax necessities, like food.
If tax systems are broad and low, that means that the tax burden is shared widely by different products and services and doesn’t fall too heavily on any one product or service.
Meanwhile, most states avoid taxing necessities so that citizens who live paycheck to paycheck are not forced to choose between paying the rent and putting food on the table.
Unfortunately, New Mexico‘s gross receipts tax (GRT) is neither broad nor low. At last count, there were 338 exemptions for everything from boxing matches to all-terrain vehicles and these exemptions significantly narrow the tax base.
The GRT also averages more than 7.25 percent across New Mexico, which is relatively high, according to the Tax Foundation.
The one area where New Mexico’s GRT gets it right is the fact that, since 2005, New Mexico no longer taxes food or medical services. This was an important reform, since the food tax not only fell on a necessity, it was also very regressive in that it fell hardest on those who could least afford it.