Inside the Capitol

Wednesday, February 06, 2013

2-6 column

20613 flat tax

SANTA FE – It sometimes takes a while for a good idea to catch on. Two Farmington Republicans, Rep Tom Taylor and Sen. William Sharer, have introduced companion bills to greatly simplify New Mexico's complicated tax code.
Nearly all taxes would be eliminated except property tax, gasoline tax and severance taxes paid by companies that sever minerals from our land.
In return, a 2-percent tax would be levied on anything that is purchased, sold or rented. For you Sherlock Holmes fans, the New Mexico Watchdog newsletter has dubbed it the 2% solution.
Would a two-percent tax on just about everything support the state's needs? The sponsors think so because it would eliminate all the exceptions, exemptions, credits and deductions that every special interest in the state has managed to get through the Legislature.
And, of course, we can expect every special interest in the state to be at the Legislature trying to carve out just one little exception for itself.
Senate Bill 368 and House Bill 369 don't stand a chance because every lobbyist in Santa Fe will be out to shoot it down. Evidently there will be others too. The New Mexico Watchdog quotes Santa Fe's longtime tax authority, Rep. Luciano Varela as saying "This is the worst bill I have ever seen in my life."
Varela's concern is that it is a regressive tax that will hurt the poor. Evidently he hasn't read the part of the bill providing tax refunds of up to 100 percent.
I can't claim to have read all 200-plus pages of the bill either but it looks very much like a concept I advanced at one of New Mexico First's early statewide symposiums some 20 years ago.
The subject at the time was the difficulty posed by sales tax pyramiding in which every company involved in the production of a product has to pay the entire state sales tax. Other semi-solutions have been enacted since that time but my idea, based on the evidence presented, was to tax everything along the line at one percent
New Mexico First gathers New Mexico leaders to examine various problems facing the state each year. Participants are divided into groups of about 15 for the discussions. My suggestion of a low broad-based tax affecting everything didn't get far. Rep. Max Coll, Varela's predecessor as the Legislature's financial guru, wasn't moved.
About the only help I received was from Karen Bayless from the natural gas industry in Farmington and Mike Boling who is in the oil business in Roswell. I assume the current proposal also addresses the pyramiding problem.
Regardless, the bills will not get far this year. The Senate Bill received four committee referrals, which means certain death. The House bill has six referrals, which is unheard of in my 50 years around the capitol.
The bills' sponsors are trying to put a happy face on this absolute rejection by predicting the 10 referrals will give the concept maximum exposure. The only problem is that neither bill likely will be heard in even its first committee.
Maybe the idea is lame-brained. Maybe the sponsors have secret data that shows this will amount to a huge tax cut. Maybe Democrats know this will lead to a huge reduction in services. Maybe Democratic leaders want to show Republican lawmakers and the governor who has the upper hand now.
Maybe it secretly is a bonanza for a particular industry. Maybe it is true, as some have charged, that New Mexico has the worst tax system in the United States and it is driving out business.
But it seemed logical to me many years ago when I had a folder of numbers in front of me. And it seems like an idea that deserves airing now.
Here is 2-6 column. I was having internet connection difficulties at the time. That must be why it didn't gety through. My apologies. I'm working on 2-8 right now


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