On Jan. 5, New Mexico Gov. Susana Martinez proudly announced—per her press release—that the state’s “fiscal house is back in order.” She also introduced her budget proposal for fiscal year 2013, trumpeting one of its provisions: a $55 million tax cut.
As of press time, few details were available beyond a credit/exemption package for veterans and their employers, a reduction or elimination in gross receipts taxes for certain small businesses and tax credits for high-tech firms.
Paul Gessing, the president of the conservative Rio Grande Foundation, says Martinez’ proposal cuts both ways. Gessing says eliminating gross receipts taxes for certain small businesses is a good move; in some cases, the cost of filing and processing tax returns may exceed the actual revenue the state receives. But he cautions against creating more credits and exemptions.
“Our tax code is riddled with tax credits,” Gessing tells SFR. By attempting to lower tax rates for some businesses but not others, he says, elements of Martinez’ proposal could further complicate matters, rather than offering real, across-the-board reform.
Granted, tax reform is a thorny subject—“There are political oxes to be gored on both sides,” Gessing notes—but Martinez’ proposal may provide less of an economic boon than her advisers hope.
“It moves us in a direction that is more complicated, [with] slightly less revenue,” Gessing says. “I’m not saying it’s a bad thing; I’m saying we have to have that conversation.”