The Tax Man cometh, wielding his scythe with the one-eighth of 1 percent at the end of it, a piece of copper shining in all its glory.
It doesn't seem like much, really; one-eighth of a penny.
But when the hike takes effect on July 1 in Santa Fe County, it's expected to generate $3.3 million for the 2016 fiscal year, which ends next June 30.
The Santa Fe County Commission in March approved the increase to offset the millions of dollars it traditionally got from the state to compensate the county for revenues lost by not being able to tax food and medical services.
Thomas Ragan
But now those monies will be phased out over the next 15 years, and county officials say that leaves them in a bind. Which is why commissioners voted to impose their own local tax to make up the difference, according to Carole Jaramillo, director of county finance.
"It makes us look like the bad guys because it's us doing it, not the state," says Jaramillo, who's entering her third month on the job as finance chief after administering the county's budget for six years. "But it's really the state. It's pulling back on its financial commitment to local governments."
This latest increase raises Santa Fe County's rate to 7 percent from 6.875. The revenue is likely to be used for repairing county roads, improving corrections and public safety facilities and shoring up old county infrastructure—from county administrative buildings to senior citizen centers.
Meanwhile, the city rate is even higher, expected to reach 8.3125 with the new county tax hike, yet whether the city chooses to follow in the footsteps of the county remains to be seen.
It's getting to the point where consumers are paying almost a dime for every dollar they spend in the City Different, whether it's that burger you buy, that taco you devour, that iPhone you upgrade, even that dog you groom. Name a service, and you're taxed for it.
Mary Kyle, who owns Happy Dog Grooming, just off St. Francis at Camino Sierra Vista, says it's hard to make ends meet, let alone keep tabs on the ever-growing tax burden as a small-business owner in Santa Fe.
Bottom-line logic dictates that businesses have to pass the tax on to their customers, and she's no exception.
A groomer for more than three decades, Kyle says she just finished paying an unemployment benefits state tax on a part-time employee she recently hired. Here was a moment that should have been sweet: hiring someone to pick up the slack in an ever-growing customer base of pooches. Instead, it turned sour.
"I'm working so hard. I'm trying to get over the hump and make a little and save a little. It was as though I was being penalized," says the 55-year-old Kyle, a Santa Fe native. "It was so complicated I had to hire an accountant to figure it out."
Believe it or not, small increments add up, just as they do for the county. Kyle says she worries that over time with more tax increases, her customers may put off grooming for a few weeks or, worse yet, not return.
Right now, the average dog cut goes for $60, but when the GRT is tallied now and exacted from the pockets of her customers, it ends up being $65.29.
On occasion, a few customers will ask her with a wink to just forgo the tax and take the $60 in cash, and as much as Kyle says she'd like to help them, she can't. She's not the type to swing under-the-table deals.
Then, in a twist of irony, she says she tells them honestly that she needs every dollar to pay her taxes.
She realizes how lucky she is to have hundreds of customers who keep coming back, their fullbreds and mutts in tow; they arrive shaggy but leave primped after meeting their master: Kyle's shear.
"They're so loyal," she says of her customers, a reference that could easily have been mistaken for the dogs, for who really are the customers? "I don't know what I'd do without them."
The same goes for the state of New Mexico, its counties and its cities. What would they all do without the gross receipts tax? It was levied almost 50 years ago as a way of taxing federal activities—the laboratories and military installations, relics from the Cold War. It was also a means of making money off companies mining the Land of Enchantment for its natural resources.
The tax, by its very design, charges for services along the chain of production, from start to finish: transportation, repairs, professional and personal services, office equipment, personal property. But over the years, the economy has changed, the Internet has made businesses mobile and the tax base has shrunk while the rate has risen. Ultimately, small businesses suffer along with the consumer; the gross-receipts tax has morphed into a de facto sales tax.
It's a touchy subject that has earned New Mexico the distinction as the 38th worst state in the nation when it comes to its tax structure, says Scott Drenkard, an economist and manager of state projects for the Tax Foundation, a nonpartisan think tank in Washington DC.
"Most states tax goods, not services, with business-to-business transactions varying," Drenkard says. "New Mexico is interesting in that it's one of three states, Hawaii and South Dakota being the other two, that comprehensively tax services."
Ideally, he says, you want to be taxed once and only once—at the point of final consumption, not all the intermediary transactions.
And here's another rub: Santa Fe city and county government both have more room to grow when it comes to tax authority. If both the city and county imposed every GRT available under state law, the rate could easily zoom to 10 percent or more.
