Proposal: Dump NM tax code for flat tax

SANTA FE (KRQE) - Two Farmington Republicans introduced a plan Thursday that would dump New Mexico's tax code in favor of a flat 2 percent state tax on every dollar spent.

The plan, laid out in a 200-plus-page bill, would simplify a tax system that Rep. Tom Taylor, R-Farmington, and Sen. Bill Sharer, R-Farmington, say has gotten clogged up with decades of deductions and exemptions.

"We have 51 bills just in the Senate just  this year asking for more deductions, more credits, more exemptions," Sharer said.

Under the proposal, New Mexico's gross receipts tax, corporate income tax, personal income tax, a number of other taxes and all of those exemptions, credits and deductions would be taken off the books.

What would replace the more than $4 billion in revenue that represents is a 2 percent gross receipts tax that would be levied on everything dollar spent in the state. Local municipalities, which rely heavily on gross receipts taxes, would be allowed to tack on up to 1 percent more to get their cut.

That means wages and food would be taxed in New Mexico, and it means nonprofits and religious organizations would no longer be exempt.  Tax rates on things like clothing would drop dramatically.

Property, gas and severance taxes would be untouched under the proposal.

Those making less than $24,000 a year would get all or some of the taxes they paid back in a tax refund based on a sliding scale.

Sharer and Taylor claim the tax-code cleanup would be revenue-neutral, that is not generate more or less tax revenue than under the current code.  However, a fiscal impact report on the bill has not been completed, and KRQE News 13 could not verify that claim.

Senate Finance Chair John Arthur Smith, D-Deming, likes the concept, but he said the idea needs careful study with the numbers needing to add up.

"The dollar amount has to be quantified with great precision and not with 'about' figures," Smith said.

The proposal is almost certainly not getting through the Legislature this year. Most bills get assigned to two or three committees, but the Senate version, SB 368, was assigned to four and the House version, HB 369, to six.