{"id":65312,"date":"2015-07-10T08:43:45","date_gmt":"2015-07-10T14:43:45","guid":{"rendered":"http:\/\/www.nmpolitics.net\/index\/?p=65312"},"modified":"2015-07-10T08:43:45","modified_gmt":"2015-07-10T14:43:45","slug":"of-groceries-ray-guns-and-the-gross-receipts-tax","status":"publish","type":"post","link":"https:\/\/nmpolitics.net\/index\/2015\/07\/of-groceries-ray-guns-and-the-gross-receipts-tax\/","title":{"rendered":"Of groceries, ray guns, and the gross receipts tax"},"content":{"rendered":"
\"D.

Courtesy photo<\/p>

D. Dowd Muska<\/p><\/div>\n

Happy New Fiscal Year. Ready for higher taxes?<\/p>\n

On July 1, furniture, haircuts, toys, shoes, lawn care, and milkshakes became more expensive for most New Mexicans. The gross receipts tax (GRT), the dominant source of local-government revenue, rose in many communities, including Albuquerque, Rio Rancho, Las Cruces, Roswell, Las Vegas, Deming, and Silver City.<\/p>\n

In Santa Fe, the rate increased from 8.1875 percent to 8.3125 percent. But not if the city has its way. A few weeks ago, the City Different filed a taxpayer-friendly lawsuit<\/a> to block the GRT hike the county adopted in March. Citing state statutes, Santa Fe \u2014 as well as Espa\u00f1ola and several local businesses \u2014 allege that \u201cwithin the boundaries\u201d of incorporated Santa Fe County municipalities, the tax should not apply.<\/p>\n

It\u2019s up to the courts to decide the validity of the lawsuit. What\u2019s not in dispute is that the the city-county face-off would not exist were it not for governors\u2019 and legislators\u2019 never-ending tinkering with the GRT. When Santa Fe\u2019s commissioners adopted the one-eight-of-a-cent tax increase three months ago, it was justified as a way to raise money to compensate for funds the state would no longer provide. The soon-to-be-ended subsidy was created to ease the fiscal pain of the 2005 removal of groceries from the GRT.<\/p>\n

A bit confused? It\u2019s understandable. The GRT is less a revenue-raising system than a political plaything, a mechanism for elected officials to perpetually penalize and reward behaviors, purchases, and investments in the Land of Enchantment. Boosting jobs, growing incomes, luring entrepreneurs, providing tax relief for the poor \u2014 it\u2019s all achievable, we\u2019re told, if visionary politicians make the proper adjustments to GRT rates, deductions, and exemptions.<\/p>\n

Every New Mexican buys groceries, but very few of us acquire ray guns. The Pentagon does, and with growing interest in directed-energy weapons, the recently completed special legislative session produced a GRT deduction for receipts earned from producing armaments that use \u201cthe frequency spectrum, including radio waves, light and x-rays.\u201d The perk will benefit defense contractors, and presumably, \u201cattract new projects and employers to New Mexico and increase high-technology employment opportunities\u201d \u2014 boilerplate language for the economic-development schemes frequently embraced by both political parties in New Mexico.<\/p>\n

Directed-energy devices might be the future of defense. But perhaps they\u2019ll prove to be of limited value to warfighters. Are state legislators qualified to make the right call? If history is any guide, the answer is no. Unintended consequences are inevitable when politicians fiddle with the tax code.<\/p>\n

That brings us back to the GRT and groceries. In 2013, Dick Minzner, a former secretary of the New Mexico Taxation and Revenue Department, and Brian McDonald, a former director of UNM\u2019s Bureau of Business and Economic Research, concluded<\/a> that the effect of the food-tax exemption \u201chas been the opposite of that intended,\u201d because \u201cby providing \u201conly limited benefit to the poorest \u2026 of our households, combined with a tax increase on all other purchases, [it] probably made our tax system more regressive by most measures.\u201d<\/p>\n

The rates for New Mexico\u2019s GRT are far too high. And the levy\u2019s broadness induces pyramiding, which legislative analysts noted \u201coccurs when the GRT is applied to business-to-business purchases of supplies, raw materials, equipment, creating an extra layer of taxation at each stage of production.\u201d<\/p>\n

But as a policy brief<\/a> written by the left-wing organization New Mexico Voices for Children advised more than a decade ago, \u201cPiecemeal tax policy doesn\u2019t work because tax systems are more than the sum of their parts.\u201d<\/p>\n

Exactly. The GRT has been meddled with enough. It\u2019s time for a simpler, more affordable, and pro-growth gross receipts tax.<\/p>\n

Dowd Muska (dmuska@riograndefoundation.org<\/a>) is research director for\u00a0New Mexico\u2019s Rio Grande Foundation<\/a>, an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

The GRT has been meddled with enough. It\u2019s time for a simpler, more affordable, and pro-growth gross receipts tax.<\/p>\n","protected":false},"author":1,"featured_media":65320,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1192,16],"tags":[118,146,107],"class_list":["post-65312","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-commentary","category-guest-columns","tag-economy","tag-poverty","tag-roundhouse"],"_links":{"self":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/posts\/65312","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/comments?post=65312"}],"version-history":[{"count":0,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/posts\/65312\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/media\/65320"}],"wp:attachment":[{"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/media?parent=65312"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/categories?post=65312"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nmpolitics.net\/index\/wp-json\/wp\/v2\/tags?post=65312"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}