By Morgan Lee
December 12, 2012
SANTA FE, N.M. – New Mexico lawmakers began using information from a fiscal planning tool that predicts future tax revenues as they contemplate changes to the state’s complex taxes on sales and business services.
The Legislature commissioned the fiscal calculator for $400,000 from a consulting group to anticipate the consequences of tax reform on state government income, family finances and business interests.
Republican New Mexico Gov. Susana Martinez and allied Republican lawmakers pushed unsuccessfully this year for an overhaul of the state’s gross-receipts tax that would lower rates while eliminating hundreds in tax credits, deductions and exemptions.
New Mexico relies on the gross receipts tax for about one-third of its annual general fund budget — collecting about $2.1 billion to meet spending obligations of $6.1 billion.
Various lawmakers have balked at potential changes that would collect more taxes from nonprofit health care providers or reinstating sales taxes on food, while industry groups have warned of possible costly and unpredictable consequences for state government.
Consultants at with the Quantitative Economics and Statistics Group at Ernst and Young outlined several scenarios that would lower the state’s current gross receipts tax rate from just over 5 percent to as low as 1.4 percent, in a presentation Tuesday to a panel of lawmakers. Within weeks, the Legislature will be able to run its own analysis on proposed changes to gross receipts taxes and personal income taxes.
Republican Sen. William Sharer of Farmington expressed hope that the forecasting tool can help lawmakers move forward with reform efforts that can shield small businesses in particular from effectively paying taxes on gross receipts twice as they contract out accounting, legal, engineering and other services.
“I think this model will certainly give us some confidence going forward,” he said. “The reason we’re not doing anything is we don’t believe the numbers we are all seeing.”