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Local lawmakers praise proposed GRT cut

District 66 State Rep. Phelps Anderson, DTS-Roswell, speaks to an audience at a November 2019 meeting of the Chaves County Federated Republican Women. Anderson has applauded the governor’s proposal to cut New Mexico’s gross receipts tax rate but hopes it can spark a conversation about broader tax reform. (Daily Record File Photo)

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Area legislators also stress need for broader tax reform

Local lawmakers this week lauded Gov. Michelle Lujan Grisham’s push to include a cut in the state’s gross receipts tax in her agenda for next year’s Legislative session, but want to see more comprehensive reform to the state’s tax structure.

On Wednesday, Lujan Grisham announced in a press release that she will include in her call for the 2022 legislative session a 0.25% decrease in the statewide gross receipts tax.

If passed by the Legislature during their 30-day regular session in January, New Mexico’s gross receipts tax rate would fall from 5.125% to 4.875% and would represent the first cut in the state’s rate since 1981.

Lujan Grisham, in a press release from her office, said the reduction in the rate would provide a boost to the state’s economy.

“Cutting gross receipts taxes for the first time in decades will put more money in the pockets of New Mexico families and businesses. We have the tools to continue building long-lasting economic success — we just have to be bold enough to use them,” she said.

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The press release describes the gross receipts tax as “akin to a retail sales tax … levied on all persons engaged in business in New Mexico.” As such, cutting the tax will have a positive impact on families and businesses statewide, the press release states.

While the statewide GRT rate is 5.125%, individual counties and municipalities can also add a local tax to that amount, bringing the total gross receipts tax rate to as high as 9.4375% in some localities. According to the Revenue and Taxation Department, from July to December 2021, with the state’s 5.125% included, the gross receipts tax rate for Roswell is 7.8333%, while it is 7.3958% for Dexter, 7.5833% for Hagerman, 6.8958% for Lake Arthur, and 6.5208% for the unincorporated portions of Chaves County.

Lawmakers from Chaves County welcomed the proposal.

“New Mexico already has a high gross receipts tax and any reduction will be positive to New Mexicans and our economy,” said state Rep. Phelps Anderson, DTS-Roswell, a member of the House Appropriations and Financial Services Committee.

He added that with New Mexico currently projected to run a surplus of about $825 million in recurring revenue for fiscal year 2023, which begins in July, the proposed cut in statewide GRT rates is one the state can afford.

“New Mexico has more than ample cash to operate state government, therefore a tax reduction is a justified next step,” he said.

House Minority Leader Jim Townsend, R-Artesia, also said he likes the direction, but whether his caucus will back the bill depends on the rest of the state budget, given the other spending obligations the state has. The press release from Lujan Grisham’s Office said the reduction will save New Mexicans $145 million annually, or $1.5 billion over 10 years.

“We have to be careful with that,” Townsend said. “She (Lujan Grisham) may decrease the GRT, which we support — you have to be careful that you don’t end up increasing the burden everywhere else.”

Republicans legislators also say they would like to see more than just a cut in the gross receipts tax rate, including a real attempt to overhaul the state’s tax structure.

“I always look forward to lower taxes, but I think at the end of the day the major thing that we need to do is a little bit more significant tax reform,” state Rep. Gay Kernan, R-Hobbs, said in an interview Friday with the Roswell Daily Record.

Unlike a traditional sales tax that is largely based on consumption, the gross receipts tax is levied on all financial transactions and the cost is typically passed on to consumers.

“It just goes on and on, every time a transaction occurs, the tax is imposed. So if there is several different transactions along the same purchase and activity, it is taxed,” Kernan said.

Republicans have been pushing for tax reform that broadens the tax base but lowers rates for several legislative sessions, but with little success.

“We’ve tried over the years but it is a really difficult thing to do,” Kernan said.

Local lawmakers say the proposed reduction needs to be looked at in the context of the eventual budget and the specifics of the legislation itself, which has yet to be crafted.

“You always have to look at the whole picture. It sounds good in the title, but you have to read the details,” Kernan said. However, with election season approaching, she said a tax cut is something legislators would likely have a hard time passing up.

“I imagine in an election year it would be pretty difficult to vote against a tax reduction,” Kernan said.

Breaking news reporter Alex Ross can be reached at 575-622-7710, ext. 301, or at breakingnews@rdrnews.com.

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