Pub. 15 2018 Issue 3

10 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S 27 cents), increase the special fuels tax by 10 cents per gallon (from 21 cents to 31 cents) and create state road maintenance fund. Approximately half of the new revenue from the gasoline tax would be distributed to the new state road maintenance fund and approximately half for municipalities and counties for road maintenance. The tax increases are estimated to gen - erate $146 million in new revenue annually with $91 million attributable to the increase in the gasoline tax and $55 million attributable to the special funds tax increase. The last increase in the state gasoline tax occurred in 1993, when the tax was raised from $0.16 to $0.22 per gallon. It has since been reduced twice to the current rate of $0.17 per gallon. The special fuels tax rate was last increased in 2003, when it was raised from $0.18 per gallon to its present rate of $0.21 per gallon. New Mexico fuel tax - es are lower than in surrounding states and lower than the national average. Seven states raised their gas tax rates in 2017. The two highest increases occurred in Pennsylvania and Michigan, with rate hikes of 7.0 cents and 7.3 cents per gallon resulting in total rates of 58.3 cents and 37.8 cents per gallon, respectively. Many local governments have seen a real decline in the amount of their gasoline tax distribu - tions over the years, reportedly due in part to competing sales of gasoline by Native American tribes in the vicinity of municipal limits. Additionally, gradually increasing fuel efficiency may contribute to observed declines. County and municipal funds would benefit directly from the legislation. Local governments are responsible for the maintenance, repair and construction of approximately 44,000 miles of roads compared to 30,000 miles of roads for which the state is responsible. Tax Reform The last time the state enacted significant tax reform was in 1969, when the Legislature made major changes to the Gross Receipts and Compensating Tax Act. Since then, the tax code has become increasingly complex as more exemptions, deduc - tions, and credits were added over the years. As a result of the revenue deductions caused by many of these tax deviations, GRT rates at the state and local levels increased, placing a greater tax burden on those taxpayers left without the protec - tion of a tax deviation. To maintain revenues in the wake of the Great Recession, the statewide GRT rate increased 1/8 percent to 5.125 per - cent. Combined with local options, the GRT rate is as high as 8.94 percent in some municipalities. Contributing to the increase in local rates was a 2013 amendment to the food and medical deductions law that allowed local governments to raise the GRT rate by ¾ percent to compensate for the phase-out of “hold-harmless” payments the state initially made to local governments to compensate for the loss of GRT revenue. For years, tax experts have advised state policymakers that New Mexico needs a tax structure overhaul built on a broad base and focused on adequacy, efficiency, and equity. The lack of tax reform has contributed to the fiscal distress of FY16 and FY17 and the downgrade of the state bond ratings. n Spending Frenzy continued from page 9