New bill would completely overhaul tax system
SANTA FE (KRQE) – It’s a proposal that’s sure to divide a lot of people. One New Mexico lawmaker wants to lower the sales tax across the state but add it to things you don’t already pay taxes on.
Here’s how it would impact you.
In Albuquerque, the current sales tax is 7 percent. The proposed bill would lower it to two percent. That means on a $100 purchase instead of paying $7 in taxes, you would pay $2.
Farmington Senator William Sharer introduced the bill Wednesday morning.
“What we have today is a tax system that is a mess.”
Senator Sharer said he has a solution for that mess.
“We have 1,089 pages of tax code today and most people don’t understand it,” he said.
The Republican says his fix is.
“No personal income tax, no corporate income tax, no compensating tax, no vehicle excise tax, no insurance premium tax and about 100 other taxes go away.”
He calls it a “hard reboot,” replacing those taxes with just one – a 2 percent “purchase tax,” or quite simply, a two percent tax on everything you buy.
“We really can have a two percent bill that pays everything,” Sen. Sharer added.
Here’s an example how it all works.
In Albuquerque, say you’re out shopping for clothes with your family and you buy a $20 shirt. Now, you would pay $1.40 in sales tax. Under Senator Sharer’s proposal, it would be $0.40.
That tax would then be added to things that currently aren’t taxed, like your groceries.
It’s a bold move, no doubt, and has some worried.
“I do think there’s room for tax overhaul,” Sen. John Arthur Smith said. “The devil is in the detail.”
That devil being uncertainty.
“We don’t know exactly how much money two percent will generate,“ the Deming Democrat said, adding it’s a risky move. “I’m looking for reliability in the revenue streams.”
“It sounds wonderful, but once again, there’s some issues out there that we have to resolve.”
He’s concerned it may not bring the state enough money.
People KRQE News 13 spoke to are optimistic.
“It seems to me that everybody has to purchase things so having to two percent on top of that doesn’t seem too bad especially if you’re getting the tax breaks,” Santa Fe resident Jennifer McCue said.
Senator Sharer tried this two years ago, more so for discussion purposes, and said a University of New Mexico analysis found this type of flat tax would bring in more than a billion dollars more for the general fund.
KRQE News 13 reached out to the governor for comment but did not hear back.
This bill would not get rid of things like property taxes and the gas tax. Senator Sharer wants any extra money generated to go towards fixing roads and bridges.
If passed it would be implemented in January 2017.