Pub. 15 2018 Issue 3

Issue 3 • 2018 11 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 Filename & version: 18-CENT-40980-Ads-Wagnon-BnkrsDigest(updates)-FIN Cisneros Design: 505.471.6699 Contact: nicole@cisnerosdesign.com Client: Century Bank Ad Size: 7.5"w x 4.625"h I AM . responsive * This is not an offer of credit. All loans are subject to credit approval. frank.wagnon@centurybnk.com MyCenturyBank.com | 817.925.8181 As a banker for bankers, I know you need fast response to stock loans and purchasing overline loans. I work efficiently so that you can take care of your clients, board and investors. Let’s talk! I AM Century Bank.* Frank Wagnon, SVP | Commercial Lending Officer The increase in GRT rates has also exacerbated the effect of tax pyramiding, still an issue in many industries. The New Mexico Tax Research Institute estimated effective GRT could reach 17 percent in certain sectors, such as manufac - turing and research and development, a significant disin - centive to businesses considering expanding on locating in New Mexico. The New Mexico Legislative Council Service in 2017 re - tained Ernst & Young, LLP and Georgia State University to analyze New Mexico’s current taxation system and develop a model which estimates state revenue impacts of potential changes in the tax base or rate contained in legislative tax reform proposals. Legislators often feel that the adequacy and diversity of the state’s revenue stream come under strict scru - tiny every time oil prices nose dive. But when the industry recovers, the sense of urgency is over and the tax reform dis - cussion is put aside. Please do not think that tax reform will be overlooked in 2019 in spite of the state’s optimistic financial picture. I believe the Ernst & Young report will be utilized for some real reform. Representative Patricia Lundstrom , Chair - woman of the House Appropriations and Finance Committee, said it best, “With a new oil boom boosting revenues, it will be easy to again delay a hard discussion on tax reform, but we can’t put this off any longer. When revenue again dip-we will find ourselves between the rock of low revenues and the hard place of mandated education spending important services will have to be cut and discussions about cutting meals for the home-bound elderly or reducing state police patrols will be even harder.” Certain findings in the report include: • The ratio of total state and local taxes (net of tax expen - ditures) borne by businesses in New Mexico is 6.4% of gross state product, higher than the peer state average and the US average. • Business taxes (net of tax expenditures) per private sector employee in New Mexico for fiscal year 2016 equaled $7,000. The US average was $5,800. • New Mexico’s residents are relatively less burdened by the personal income tax (PIT) of their peers (except for Arizona) as indicated by their relatively low values of PIT revenue as a percentage of personal income and PIT revenue per capita for fiscal year 2016. • Approximately 45% of gross receipts in fiscal year 2017 were classified as taxable for firms with annual receipts of over $10 million. Alternatively, more than 70% of gross receipts are subject to tax for firms with gross receipts of less than $100,000. • The GRT is fairly regressive. Taxpayers with incomes less than $17,000 pay almost 10% of their income as GRT taxes while those with incomes above $338,000 pay 1.3% of their income in taxes. Although higher income individuals have a larger overall tax liability compared to low-income individuals, they pay less tax as a percent of their income. • New Mexico’s personal income tax demonstrates a fair degree of progressivity, particularly for incomes up to $100,000 due to the presence of the graduated rate structure and two credits that provide targeted relief to low-income taxpayers. n