Tax changes to create new budget balancing

By Tony Parra

New Mexicans are now free to purchase groceries without a tax, but it simply means they have to pay a higher tax for everything else.
Portales residents may need to take another look at their receipts after they purchase groceries since the tax cut was imposed on Saturday. The gross receipt tax in December was 6.8125 percent. If a customer purchased $100 worth of groceries on Friday, they would have paid an additional $6.81 in taxes. Starting Saturday, that $6.81 could go towards something else.
“It will be beneficial in a lot of ways,” Sherrye Burleson of Portales said. “It will help a lot of people. It helps everyone out where other taxes, only help out some people.”
To compensate, the gross receipt tax in Portales has increased from 6.8125 percent to 7.5625 percent.
If a customer buys anything else besides food, such as a pair of pants, batteries, or food bought at a restaurant, the tax on the item will be higher. For example, a television set which costs $100 had a tax of $6.81 before 2005, but now the tax would be $7.56.
“I don’t think it will be a huge impact,” Brad McCarson of Portales said about the financial impact. “It will help a little. My only question is, how are they going to make up for the loss of the food tax? I’m afraid there will be increases in the other taxes.”
Debi Lee, Portales city manager, said it’s hard to know just how much of an impact the tax changes will have on the city budget. Lee said the city receives 72 percent of its revenue from gross receipts taxes.
“We have had the governor and committees assure us it would not harm municipalities,” Lee said. “I’m optimistic because their intent is good, but we won’t know for sure until March, after the legislative session is over.”
Lee said the municipalities receive money from the state government for the gross receipts sales two months after the sales. Lee said businesses send in gross receipt tax
Lee said another concern for her is that prospective businesses will look at the high gross receipt tax in Portales and not want to bring their businesses to Portales. The gross receipt tax in Portales is the third highest in the state out of all New Mexico municipalities (behind Ruidoso, 7.68 percent, and Gallup, 7.68 percent).
While some claim that higher gross receipts taxes will harm business recruitment, other cite the help that tax-free grocery shopping provides.
“The food tax punishes large families,” Fred Nathan, executive director of the think tank Think New Mexico, said. “It’s (food tax cut) a big benefit to families. They will be able to save money on their food and spend it on something else.”
Think New Mexico members lobbied for the elimination of a food tax during the 2002 legislation, also. They lobbied for the change during the 2004 legislation and it was passed.
A family of four in New Mexico spent more than $225 on the food tax each year, according to the Think New Mexico Web site.
New Mexico was one of only eight states which fully taxed food. The other states are: Mississippi, Alabama, Colorado, Utah, Missouri, South Carolina, West Virginia.
New Mexico legislators enacted the food tax as a temporary, emergency measure for the great depression in 1933.