Published: 2:20 pm, Thu. Mar. 16th, 2017Updated: 2:19 pm
New Mexico lawmakers listened to an outcry from dozens of nonprofit organizations and industry groups as a Senate panel reviewed a proposal Wednesday to eliminate a wide array of tax exemptions, deductions and credits in an effort to stabilize state revenue streams and lower overall tax rates.
Republican Rep. Jason Harper of Rio Ranch outlined provisions of the far-reaching tax reform plan designed to improve the business climate in New Mexico by sweeping away an array of tax breaks.
“If you don’t qualify for one of these tax exemptions, how on earth can you compete,” in the New Mexico economy, Harper said. “We want to have a climate where someone can take risks and bring jobs to this state.”
Legislative Finance Committee economist Jon Clark cautioned that the reforms would have a major impact on nonprofit entities that would begin paying the gross receipts taxes on sales and business-to-business transactions.
“By the state not picking winners and loser any more it does create some dramatic changes,” Clark explained.
Representative for hospitals, health clinics, public schools, performing arts organizations, farms and insurance carriers warned of costly and unpredictable consequences.
The changes would cost community health clinics across the state about $14 million annually, leading to physician layoffs that would starve the facilities of additional revenue, said David Roddy, executive director of the New Mexico Primary Care Association. He said clinics that depend on state and federal Medicaid dollars in low-income areas cannot pass on costs to insurers or customers.
“They’re not special tax loopholes or consideration,” Roddy said of the current exemption for nonprofits. “They’re there because nonprofits help states, particularly struggling states like New Mexico.”
Stan Rounds of the Association of School Superintendents estimated public schools would pay between $16 million and $20.5 million in new taxes annually — money that would have to be made up elsewhere in state budgets to ensure adequate classroom funding.
Performing arts groups will be stung by new tax payments on ticket sales, said Anthony Zancanella, executive director of Opera Southwest.
Terri Cole of the Greater Albuquerque Chamber of Commerce urged lawmakers to stay the course and approve the reforms.
“We believe that it is a comprehensive approach, we believe that is the only way,” she said.
The legislation would eliminate scores of exemptions for businesses dealing with elderly care facilities, textbooks, film companies, wind and solar energy equipment and farm tractors — to name a few.
The bill also restructures gross receipts taxes to avoid layering redundant charges on individual businesses, an effect known as “pyramiding.”
Several Senators expressed concerns about the complexity of the legislations and possible unintended consequences. A fiscal impact report from legislative analysts warned the bill “could lead to revenue shortfalls for the state and local governments or unanticipated revenue windfalls.”
“If we’re going to act, we have to be cautious,” said Sen. Clemente Sanchez, D-Grants.
Consideration of the tax overhaul takes place as lawmakers race to craft a balanced budget before they adjourn Saturday, amid a budget crisis linked to a downturn in oil prices and a sluggish economy.