State Rep. Jason Harper of Rio Rancho said he believes the future of New Mexico’s economy depends on lowering the state’s gross receipts tax.
“The GRT right now is one of the most-mentioned reasons why businesses don’t come to New Mexico,” Harper said in a recent interview. “We’re one of only two states that have a gross receipts tax.
“A lot of folks don’t understand it, it’s very high,” he said. “By lowering it — (from) the average of about 8 percent to 2 percent — this could be one of the biggest incentives for businesses to come to New Mexico.”
Harper last week introduced House Bill 491, which proposes to decrease the state’s gross receipts tax to about 2 percent. Harper said the bill would accomplish that by getting rid of all 370 GRT exemptions to businesses, as well as removing exemptions for charities and non-profits.
“The joke is, if you have a friend in Santa Fe or if you hire a lobbyist, you get an exemption to pay the GRT. That’s become especially bad the last two decades,” he said. “We haven’t cut spending, so every time we put in a loop hole, or another hole in the Swiss cheese block, the rate of everyone else goes up. The folks that this really hurts the most is small businesses, which don’t have a lobbyist in Santa Fe. They end up shouldering more than their fair share of the GRT.”
Harper said if the state were to remove all exemptions to businesses, the gross receipts tax could immediately be cut in half. By widening the base of taxpayers, including non-profits and charities, Harper said the state could save and earmark $1 billion to $2 billion for road projects.
He said after the bill had been in place for two to three years, the gross receipts tax rate would be brought down to about 2 percent.
The 170-page bill was introduced last Wednesday and has since received seven referrals. It was expected to be heard by Transportation and Public Works Committee this week.
Harper said although he is pushing for every legislator to see his bill, he does not want it to be enacted during this year’s session.
“It’s not ready for prime time,” he said. “I’m going to ask for a subcommittee to be formed to really study this and during this next 30-day session (in 2016), we’re going to be serious about passing it.”
Harper said he does hope to see his other gross receipts tax bill, House Bill 421, pass in this year’s session.
The bill, which is also expected to be heard this week, would “make sure that the state honors its promise to counties and cities to provide their hold-harmless funding, to make sure they get the hold-harmless funds they’re promised,” he said.
Harper said the bill would add a provision to a tax reform bill passed two years ago to phase out hold-harmless payments to cities and counties over the course of 15 years, beginning in 2016.
Hold-harmless payments are payments from the state to cities and counties, making up for the financial difference after gross receipts taxes were removed from food and medicine in 2004. With the phase-out, legislators allowed cities to raise gross receipts taxes, if necessary, to replace the loss of hold-harmless revenues.
Harper said his bill would help make the hold-harmless phase-out more equitable.
“(My) bill puts in incentives that cities and counties don’t raise their gross receipts tax until they actually need it, and that way they’re not going to get a windfall,” he said.
“Some cities didn’t have enough taxing authority to make up for the losses; some counties had too much taxing authority, so I brought it back down. The idea is just to make sure that everyone is treated equitably and fairly, that everyone can make up the losses over these 15 years in their city budget and that there’s a nice predictable revenue stream and that these hold-harmless taxing increments are only used for replacing the losses of the hold-harmless funding.”