Lawmakers presented report suggesting growing rate of unpaid New Mexico taxes

Politics - Government

SANTA FE, N.M. (KRQE) – New Mexico lawmakers are learning about the growing amount of money the state is missing out on from unpaid taxes. State employees outlined the latest estimate of how large the so-called “tax gap” is in New Mexico during a meeting of the New Mexico Legislative Finance Committee (LFC) Thursday.

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An updated report outlining the state’s estimated uncollected taxes was the recently outlined in the LFC’s July 2021 newsletter. State tax collection employees estimate the state is missing out on more than 743-million dollars in uncollected taxes each year. That’s up from an estimate of about 635-million dollars a year that was outlined in a 2016 state report.

The tax gap is more simply defined as the amount of money the state thinks should be coming into the state but isn’t because people in business either aren’t paying their taxes or they’re underpaying for reason or another. Despite the increase in the tax gap estimate between 2016 and 2021, state employees say they’re not surprised.

“That number seems, it feels astronomical at first, but we didn’t necessarily feel it was outlandish for a few reasons,” said Micaela Fischer, program manager for the Legislative Finance Committee. “First, the department has already identified a fair amount of that tax gap.”

Fisher outlined Friday the state is at an “all-time high” for the amount of taxes that are currently under protest with the state’s Tax and Revenue Department: roughly $592-million. The Tax and Revenue Department has also roughly $800 to $900-million in taxes that are considered “aged receivables,” or money owed from prior tax years based on audits.

The Tax and Revenue Department outlined some measures Thursday that have resulted in the state working toward increase collection of tax revenues. Those include a $235,000 investment in call center technology that the state says has resulted in a 5% increase in tax collections. The state’s Tax and Revenue Department also recently spent about $1.15-million on a “data analytics” tool that has helped the department better “objectively pick” which tax accounts to audit and identify more returns for audits.

View Thursday’s “Tax Gap” slideshow presentation for lawmakers below:

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