Food tax talk reemerges as budget worries grow

SANTA FE (KRQE) – Senate Finance Chair John Arthur Smith, D-Deming, has reintroduced a plan to reinstate a state tax on groceries as a way to “send a message” about the state’s financial situation.

The amount of new money lawmakers have had available to spend has shrunk in budget projections, now down to a little more than $30 million, primarily because of falling oil prices and declining gross receipts revenues.

“If the free fall continues there might be a discussion for a special session,” Smith said.

Smith says with a turnaround not yet in sight, lawmakers would have a choice if the downward trend continues, cuts or tax hikes. To that end, he’s introduced a number of bills that look at the tax side of things, including some that put the brakes on some tax credits. Another bill, SB 281, caught attention for how it would raise revenues.

“We damaged the reliability of our revenues when we repealed the food tax,” Smith said. “I’m not trying to get that back in but it’s an option that has to be considered.”

Lawmakers decided to stop taxing groceries in 2004 in an aim to make the basic necessity more affordable. It’s been targeted occasionally since. In 2010, then-Governor Bill Richardson vetoed a proposal to partially reinstate the food tax. Three years later, on the eve of the session wrapping up, a food tax reinstatement was nearly snuck into a hail mary tax package that ultimately saved the session. It was removed before that bill was approved at the session’s buzzer.

The temptation of reinstating the food tax is clear, because the money available if the state did so would be significant.

The New Mexico Tax and Revenue Department says in FY 2014 alone, that the state missed out on $132 million in gross receipts revenue from not having the tax on the books. On top of that, the legislature has been paying local communities millions a year in hold harmless payments to make up for the share of tax revenue they used to receive from charging tax on food. In FY 2014 alone, that payment was $107 million.

Because SB 281 also reduces the overall tax rate on everything else statewide, Sen. Smith estimates his bill would mean an approximately $150 million boost to the budget overall.

But make no mistake, the food tax proposal remains widely unpopular. It’s one thing both former Governor Richardson and current Governor Susana Martinez agree on in their opposition.

“The Governor has long opposed and continues to oppose reinstating a tax on food and groceries in New Mexico,” said Martinez spokesperson Michael Lonergan in a statement.

Think tank Think New Mexico led the charge in 2004 to repeal the food tax in the first place and has fought efforts to reinstitute the tax. Fred Nathan, Think New Mexico’s executive director, says that if money’s tight, budget makers need to look somewhere else.

“It leaves me wondering, are we so lacking in ideas that we have to go back to reimposing a tax on groceries like Mississippi and Alabama?” Nathan said.

The big criticism of a tax on food is that it would be regressive, disproportionately hurting the poor. Smith says that without more revenues from somewhere, cuts could come that would top that.

“What’s really regressive is when you can’t fund education and health care,” Smith said. “That’s really regressive.”

Smith admits he doesn’t expect the bill to go anywhere and is introducing more to send a message and start a conversation than anything, hoping talk of a food tax has New Mexicans realize that the state’s budget picture is not so rosy.

 

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