Enchantment State News

A new report by a Philadelphia-based group on New Mexico’s tax structure has made several recommendations designed to improve and stabilize it.

PFM Group Consulting, LLC presented to New Mexico Legislature’s Revenue Stabilization and Tax Policy Committee the report that makes several recommendations, according to the PowerPoint Presentation “State of New Mexico Tax Structure: Key Issues and Alternatives December 2020.” The Rockefeller Family Fund retained PFM Group Consulting “to identify ways to stabilize and diversify New Mexico’s tax and revenue structure,” the report said.

Among recommendations, the group said that efforts should be broadened “to diversify the economy and target key industries.”

“While not solely an issue of changes to the tax structure, revenue diversification also requires a non-tax policy focus on key industries – through targeted job training, focus at state universities on agglomeration economies and industry clusters,” the PowerPoint presentation said.

The report said that the oil and gas industry is the largest component of New Mexico’s economy, even as there’s been “significant disruption within the industry, including earlier this year when prices on the WTI (West Texas Intermediate) crude oil futures market went negative.”

“Multiple studies suggest that the oil and gas industry is unlikely to recover its level of output in the foreseeable future,” the report said. “Reliance on the energy industry in general carries significant risk for states: One analysis identified New Mexico as among the most volatile state tax structures. The current structure has not kept pace with overall economic growth.”

Noting that New Mexico relies more on “consumption tax and less on its income tax,” the report recommended that a personal income tax rate structure be reinstituted “with a higher marginal tax rate(s) at higher income levels.”

“While the trend in the early 2000s was to reduce top rates, more states are revisiting and increasing the top rates. This aligns with research that suggests ‘millionaire flight’ is more myth than reality,” the report said.

The report also recommended eliminating the capital gains personal income tax deduction, reinstituting an estate tax and establishing “tax parameters for recreational marijuana.”