Column: Former Farmington mayor supports tax increase
I am fully in support of the proposal to raise the gross receipts tax in Farmington. I don't believe Farmington has an option, like it or not. My comments at the City Council meeting on July 28 it seems were somewhat unclear and I feel I should clear it up for both the citizens and the council. I don't like raising taxes although in this case our community is up against a situation like we have never seen. Back in the '80's we were able to reduce expenses to survive the recessions through layoffs and reassignment of tasks. Those recessions were very different from the present situation in five ways.
First, following those recessions the state didn't reduce our distributions as they have with the elimination of "hold harmless."
Second, back then county government was funded predominately with property taxes and very little gross receipts tax. Now counties have significant gross receipts tax authority and have imposed a good portion of it while the cities are, as they were in the '80's, predominately funded with the GRT.
Third, back in the '80's we recovered after recessions and things went back to normal, now it's the "New Normal." When you lose an economic base job now, potential replacements require only a third or so of the jobs. Case in point is San Juan Generating Station closing two units and eventually losing a few hundred jobs. The proposed gas fired plant that would produce about the same output will employ less than 50.
Fourth, internet sales have and will continue to eat into GRT.
Fifth, in the '80's there were few credits, deductions and exemptions from GRT and therefore we enjoyed a very broad tax base which is the main tenet of GRT. It is designed to have a broad base and a low rate. Subsequent to the elimination of the tax on food (the root cause of this proposed tax and the straw that broke its back) the legislature was flooded with bills to credit, deduct and exempt GRT because the rate was then to high. Because GRT applies to services as well as goods and because it pyramids, businesses have difficulty competing. We have passed many credits, deductions and exemptions further narrowing the base and virtually destroyed the very foundation of GRT.
The bill passed by the Legislature has only complicated our situation even more along with the administration of the tax itself. Furthermore it only applies to the large cities in New Mexico. The three 1/8s of taxing authority doesn't match the 1/15th that goes away each year for 15 years. When I commented that we should be responsible and only increase our reoccurring expenditures by 1/15th, I was in no way insinuating that the City Council has been irresponsible in dealing with the huge decline in revenue over the past few years. In fact they have done a commendable job. I do think that the amount of increase the Council deems appropriate should be managed by adding 1/15th per year to the reoccurring budget and the balance for non-reoccurring needs and building a sizeable reserve fund.
What we have is grossly unfair, muddled with deductions, credits and exemptions and accompanied by over a hundred other taxes in lieu of GRT.
It will take a major effort by us all to fix this complicated mess. We must take a hard look at Senator Sharer's 2-percent proposal and craft a very complicated issue into a much simpler solution if we plan to compete in the New Normal.
Tom Taylor served as minority leader in the New Mexico House of Representatives and is a former Farmington mayor.