Battling taxes - municipal governments of New Mexico force state government to modify tax policies

New Mexico Business Journal, August, 1991 by Jack Hartsfield

Battling taxes

It's really not a clone of California's Proposition 13 or even the Boston Tea Party, but a lot of businesses, municipalities and individual taxpayers in New Mexico are saying they're fed up.

In small bands here and small bands there, they're talking about tax revolt; they're talking about forcing the legislature and the administration to wake up and smell the roses.

They're talking about coaxing new industries and businesses to the state instead of insulting them.

They're talking about weaning away from the state's longtime reliance on federal bucks and diversifying the private business-industry mix.

And they're talking about being tired of being broke and taxed to death for the privilege of living and working in the Land of Enchantment.

During fiscal 89-90, $2.29 billion in taxes were paid into the state, $149 million more than the previous fiscal year.

Of that amount, $1.03 billion came from the gross receipts and compensating tax; $476 million from income taxes; $163.2 million from transportation taxes and fees; $164.6 million in fuel taxes; $423.7 million in severance taxes; and another $42.2 million in selected taxes.

With the lion's share coming from the gross receipts and compensating tax, a lot of New Mexicans feel it's an unfair levy considering that it impacts those least able to pay while the comfortable keep highly-paid tax consultants busy looking for loopholes.

New Mexico cities are still miffed over what municipal managers call the latest insult from Santa Fe, the creation of the new government gross receipts tax which also happens to fly in the face of local option taxation.

Some snort that as the measure was initially written, it fell only slightly short of a ransom, a 5 percent tax on money paid for services offered by local governments - including garbage collection, water service, publicly owned gas and electric utilities - over and above the regular gross receipts tax.

It took a bit of doing on the part of a lot of municipalities to talk down the likelihood of facing double taxation on utilities as initially outlined by state tax secretary Dick Minzner.

Minzner and the state backed down in June by eliminating municipally-owned gas and electric service from the latest draft of regulations listing what was subject to the new government gross-receipts tax.

Even legislators backed away from the initial measure, saying they never intended to write in what did amount to double taxation.

Bill Fulginiti, executive director of the New Mexico Municipal League, was among those putting heat on the Taxation and Revenue Department, the legislature and Gov. Bruce King to back away from double taxation without representation.

Adding insult to injury, in August 1992 the state might cut off the one-eighth of 1 percent of the gross receipts tax it now sends to cities.

The state Taxation and Revenue Department also wants to raise the fee it charges to collect and distribute taxes for cities - even if the cities are projected to get less anyway.

So the bean counters, still looking to raise another $12 million for state government, took a sharp pencil to finagle what is and isn't taxation in questionable areas.

Now transactions within municipal agencies aren't taxable; utility stand-by charges are off the hook; tax will be charged on the full amount of a sale collected; landfill operations won't be included in the tax on garbage collection.

School bake sales will be taxable, but a car wash won't since taxes must be paid on fund-raisers that include sales of goods; portions of tuition paid to universities to subsidize student admissions to sporting events will be taxed.

"There are still serious concerns about portions of the governmental gross receipts tax," says Fulginiti. "We'll keep after it and take our concerns to the governor and the legislature.

"Municipalities are being left in a dilemma."

And all of that has nothing to do with local option taxes.

Albuquerque Realtors, for instance, are miffed at a potential property tax hike to fund pay increases for Bernalillo County employees. Max Mansur, the board's director of government affairs, says if the county wants salary parity with city employees, then the county ought to look at its own house instead of the public pocket, namely in budget cuts elsewhere.

Mansur contends imposing the property tax hike could create a revolt among property owners as well as adversely affect the housing market.

"When you talk economic development, potential businesses do look at the instability of the tax base," says Fulginiti. "They want to live and work where there is a stable tax system."

Fulginiti notes that it is curious that municipalities, homebuilders, Realtors and the average individual taxpayer are all starting to sing the same tune: fight any new tax.

"The revolt could come from the grass roots," says Fulginiti. "You'll see bond issues being turned down, tax referendums failing. That'll be the sign of the revolt."

New Mexico's somewhat antiquated and always confusing tax structure is having long-range ramifications.