Make 2020 the year NM finally starts to reform its tax code

Do we dare hope? Could bipartisan action from N.M. lawmakers on substantive tax reforms really happen in January?

A Dec. 13 story by Journal reporter Dan McKay describes an effort headed by House Speaker Brian Egolf, a Santa Fe Democrat, and Rep. Jason Harper, a Rio Rancho Republican who has long advocated for tax reforms, to reduce the overall tax rate and get rid of the notorious “pyramiding” practice.

Both changes would be major improvements to N.M.’s current tax code. The Journal Editorial Board has long advocated a broad but shallow approach to the state’s gross receipt taxes — in other words, applying the tax on goods and services to more people, but lowering the rate itself. Egolf’s legislation would drop the rate half a percentage point. Is it the magic number? Who knows? But it’s a good start, especially considering the current state of prosperity we find ourselves in.

Then there’s pyramiding, the taxation of business-to-business transactions. It’s a horribly unfair practice that unduly punishes small businesses that aren’t quite big enough to have their own accounting or human resources department and have to turn to other companies for those services — companies that are often themselves small businesses. Eliminating the structure would go a long way to making New Mexico an easier place to live and work for the thousands of small businesses that make up so much of our economy.

Of course, taxpayers deserve to know if any decrease will simply translate into an increase somewhere else — say higher local GRT rates as happened via the Legislature’s “hold harmless” debacle after it repealed the food tax. And there will be more work to do, especially addressing the “Swiss cheese” that is New Mexico’s tax breaks and loopholes.

Egolf and Harper are not re-inventing the wheel here; these reforms have been discussed in multiple sessions, but lawmakers had no appetite for reining in their spending in lean times. Now that oil and gas is pouring a billion-plus into state coffers, their fellow legislators need to pay serious attention to the discussion and finally level the paying field for N.M.’s consumers.