ALBUQUERQUE—Changes in the state’s corporate income tax (CIT) structure during the 2013 and 2014 legislative sessions are causing New Mexico’s CIT revenue to erode. This important revenue source helps stabilize the state’s general fund, which has had erratic growth in recent years, according to a report released today.
“Almost all of the states collect corporate income tax, and although in New Mexico it represents less than 5 percent of the total revenue pie, it’s an important revenue source,” said Gerry Bradley, Senior Researcher and Policy Analyst for New Mexico Voices for Children, and report author. “But if we continue to undermine it, it will cease to be a meaningful source of revenue,” he added.
The child advocacy group is releasing the report in early April to make a point. “April is when people think about their personal income taxes. What many don’t realize it that how much you pay in income and other taxes is dependent on how much is raised by other revenue sources, like corporate income taxes,” said James Jimenez, Director of Policy, Research, and Advocacy Integration for NM Voices. “The more we cut sources like corporate taxes—which we’ve been doing a lot of in New Mexico—the more we have to collect from individuals and working families to make up the difference. It’s that or shortchange our public schools, health care, and public safety services,” he added.
About two-thirds of all CIT revenue is paid by three industries: mining, manufacturing, and management of companies. Manufacturing CIT is expected to drop off as legislation passed in 2013 comes on line. Whether this will impact the number of manufacturers operating in New Mexico or the size of their workforces remains to be seen.
“Blanket tax cuts make for dubious economic development tools,” said Jimenez. “Tax deals that fail to contain trigger mechanisms or accountability measures are very likely doing the state more harm than good. Real economic development is tied to investments in an educated workforce, infrastructure, and other measures that improve the quality of life. We can’t afford those investments if we’re giving away the farm in tax breaks.”
The report, “The Corporate Income Tax: A Declining but Essential Part of New Mexico State Revenues,” also looks at industries by income bracket, income tax returns, and income tax receipts. It is available online at:http://www.nmvoices.org/wp-content/uploads/2014/04/CIT-report-4-14-web.pdf. The executive summary is available at:http://www.nmvoices.org/wp-content/uploads/2014/04/CIT-report-exec-sum-4-14.pdf.