The following article appeared recently in the Carlsbad and Artesia newspapers.
Citizens of one of New Mexico’s most conservative counties, Eddy, will vote in a mail-in election “on” September 26. At issue are two 1/8th cent tax hikes that had been passed by the County Commission (one tax is being voted on for Eddy County Detention Center and a second 1/8th tax is for “general purposes”).
For starters, it will be interesting to see if conservative Eddy County will continue the nascent New Mexico tax revolt that, of all places, began earlier this year in liberal Santa Fe when residents of that City overwhelmingly voted to oppose a soda tax. Other taxpayer victories this year include a defeated recreation bond in Los Alamos and a new gas tax that Albuquerque’s City Council refused to consider under pressure from opponents.
Eddy County seems like a natural place to continue the string of anti-tax victories. For starters, the County is hardly starving for revenue with the total budget having grown from $42 million back in 2011 to nearly $66 million in 2016. Over that time period the County county population grew by just 6.6 percent.
With Artesia and Carlsbad comprising 71.4 percent of the county’s population, it is worth noting that gross receipts taxes have risen by 26.3 percent and 22.2 percent in those two cities respectively since 2000. Those are steep hikes in a tax that is both “regressive” and anti-business.
The GRT is considered “regressive” because the tax disproportionately sucks up a higher percentage of the earnings of those with lower incomes. Higher rates inflict even more pain.
More importantly, the gross receipts tax is the target of reform efforts in the Legislature because it uniquely hurts small businesses and entrepreneurs. If I hire a bookkeeper on contract (to take just one likely scenario) who works in New Mexico, I pay taxes. If I locate my business in another state or even just hire a bookkeeper in Texas or another state, I don’t have to pay the tax. I can’t think of a better way to shift economic activity away from our State. Rising rates simply mean more economic damage.
While it’s true that the rate increases over the last 17 or so years have been driven by a variety of state, city and county forces, the fact is that over time rates have risen most for people who haven’t got lobbyists in Santa Fe.
In fact, over time various industries have realized that the “only” way to do business in New Mexico is to hire lobbyists to get an exemption or some other favor under the GRT. These tax hikes are simply reverberations from Gov. Bill Richardson’s misguided decision to exempt groceries from taxation.
This set off a chain of events including “hold-harmless” payments from the State to local governments which are being phased out. It has been a messy process and New Mexico remains 2nd highest in unemployment.
So, what is there to do? Eddy County voters should reject higher taxes and instead tell their local officials to engage with lawmakers in Santa Fe to push for tax reforms that, if enacted, will reduce the GRT rate, eliminate “pyramiding” taxes paid on top of taxes, and will eliminate the “Swiss Cheese” exemptions and other provisions that have made their way into the GRT in recent years.
It is not an easy process, but raising the GRT and making Eddy County an even less attractive place to work and do business is not the answer.
Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.