This year's legislative session could see significant changes to New Mexico's tax code. In her State of the State address, Governor Michelle Lujan Grisham spoke of cutting the gross receipts tax and income taxes, among other adjustments.
The cost of the Governor's preferred tax package could be around $500 million in annual, recurring revenues, according to a preliminary analysis.
But in a new report, the consulting group PFM warns against cutting recurring revenues like taxes during a time of surplus money that could be short-lived.
In a press briefing, PFM's director Ryan McNeely said New Mexico uses recurring tax revenues to fund state programming but unlike the vast majority of other states, it is reliant for 30% or more of its general revenues on a single industry: oil and gas.
PFM finds the state's revenue projections could be overstating aggregate revenues from that industry by between $26 billion and $36 billion over the next 15 years.
"So if you were to take this one time revenue from this windfall from the past couple of years, and cut other permanent tax streams, it's really just exacerbating the gap that you're going to need to make up in the future," said McNeely, who also spoke to the Revenue Stabilization & Tax Policy Committee in December.
PFM does recommend making the tax system more equitable but has different ideas about how to do it, including broadening the base of activities subject to the gross receipts tax and re-instituting an estate tax.
Its report also advocates revisiting the state's tax incentive structure, saying that many of the more popular tax breaks may result in significant losses to the state. One such break is the film production tax credit.
In an email, a senior advisor for PFM said the group believes it is likely that the New Mexico state treasury does not recoup the entire cost of the film credit through tax revenue.
