When it comes to “fair taxes,” a new report has ranked New Mexico 38th in the country — meaning that consumers and businesses alike are hit harder here than many other states.
According to WalletHub’s 2015 Most & Least Fair Tax Systems report, New Mexico has the 12th “least fair” tax system in the U.S. — a conclusion gleaned from both consumer surveys, as well as data from the Institute on Taxation and Economic Policy (ITEP) and the U.S. Census Bureau. Data showed that while New Mexico relies significantly less on personal income tax and property taxes, the state relies heavily on sales, excise and other taxes.
One of New Mexico’s more well-known excise taxes is the gross receipts tax, which taxes the total gross revenues of a company. In New Mexico, the gross receipts tax rate varies from 5.125 percent to 8.6875 percent depending on business location. Gross receipts taxes have been a hot topic in New Mexico of late, with many business leaders speaking out against it.
Jill Gonzalez, an analyst for WalletHub, says the report is a mixed bag for New Mexico.
“For businesses in New Mexico, [the data shows] that [the rankings] are actually a good thing. New Mexico just reduced the corporate tax rate, so that’s better news. From a consumer point of view, it could trickle down and consumers will feel the effects of that soon,” she said.
However, she also said that the state’s tax on the lower and middle-classes is hampering economic growth. Data from ITEP shows that the bottom 20 percent of earners carry the highest tax burden in most states and New Mexico’s middle class is considered one of the most overtaxed in the country; both classes are taxed about 10 percent.
By comparison, the top 20 percent of earners are taxed the least — about 5 percent, according to Gonzalez. If those with the smallest incomes are taxed the most, it equates to less consumer spending and less revenue and profit for businesses in the state.
Still, tax fairness is debatable. Using other measurements, a recent report ranked the state as one of the lowest-taxed in the U.S.
By: Sal Christ (Albuquerque Business First)
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