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GRT/Sales Tax, Whats Really Regressive
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Author:  crow [ Thu Apr 27, 2017 1:00 am ]
Post subject:  GRT/Sales Tax, Whats Really Regressive

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The tax on food is regressive you say? Regressive in the sense that the working poor pay a disproportionate amount of their income in taxes when compared to higher income earners. Indeed that is true but so too for gasoline tax, toilet paper tax, cleaning supplies and well every other sales tax so back in 04, in a stunning act of short sightedness the NM legislature abolished the most dependable source of income for the state, counties and municipalities, the so called food tax.

When the counties and municipalities raised hell over the lack of funds to maintain even basic infrastructure, the legislature, feeling flush from taxes on an unusually high and rising cost of crude oil agreed to give local governments an equivalent amount of money to what would have been generated by transactions at the grocery store food sales, they call it “hold harmless”. The problem is the price of crude and the taxes it generates is extremely volatile but for 3 years the price rose to record highs until 2008 when it crashed and crashed again in 2014 and 2015 when the legislature began to reduce their hold harmless payments to those counties and municipalities below a certain population.

For municipalities the cut off point is 10,000 population so Silver City has been loosing hold harmless each of the last two years; about $300,000 per year.

The county cut off is a population of 48,000 so Grant County with 29,000 has not had any reduction in payments; yet through a loop-hole in a poorly written law, the county passed a 3/8 GRT tax increase given to local governments to compensate for any hold harmless losses. Silver City was angry at the County because the Town was loosing money and they didn’t feel they could raise taxes again after the County”s snafu; but now things could change soon.

Though nobody knows what the legislature is going to do about hold harmless and the budget but as a friend put it, “were either a little screwed or a lot screwed”. The Town, citing a worst case scenario, would raise the GRT/Sales Tax another .375 making tax at the register 8.375% and raising the property tax by 1 mil, closing or at least cutting hours at the museum and library and cutting services like patching pot holes and keeping up the parks.

Whats Really Regressive but first- What We Know:
The State, County and Municipality revenue from GRT/Sales Tax at the grocery store registers, including food is or was until 2005, the most dependable of all stores and other sources; it was dependable enough to build a budget around. Sound budgets are impossible and in constant need of adjustment since the repeal of the food portion of sales.

Silver City and many other small but over 10,000 municipalities are now under funded and under staffed in all their departments as are the public schools and universities forcing what's called Austerity, an austerity manipulated from the top classes and bought into by the legislature and Governor.

All taxes are regressive to the poorer compared to the higher income earners.

What’s Really Regressive is not what’s is taxed but that GRT/Sales and Property Taxes keep going up but the minimum wage for the working poor stays the same. It’s one more way the working poor get poorer and their buying power decreases and local businesses see decreasing sales making the economy worse. Remember that recessions and depressions are caused when money stops flowing in a circular motion through a community or nation.

Silver City is on the rocks and sinking.
And what has the SC Town Council done to save the ship? Nothing; oh, at Tuesday Council meeting they instructed Alex Brown to write a letter and send it to all the legislators and governor and to write a fact sheet for residents to explain why the council will raise taxes. But they refuse to discuss raising the minimum wage to lessen the regressive nature of the taxes they’re about to raise.

Some Back Story:

When the food tax disappeared in January 2005 (from a 2004 vote) and the legislature realized they screwed local governments they voted to institute the hold harmless statute they had to dedicate a source revenue so they chose the most volatile source in the state, taxes from the price of crude oil. At the time crude was sell a fairly good price historically, in the low $80 per barrel and that price rose to $153 per barrel by 2007 but in 2008 the price crashed to levels not seen in many years to $20 per barrel less than when hold harmless was instituted. A price recovery was seen again until 2014 when the price again tanked reaching, by 2015, just under $30 per barrel, $50 less than when hold harmless was instituted; since then nly a modest rebound and another downward trend is happening now.

In 2015 crude oil export restrictions were lifted by the Feds in the hopes that it would reduce an oil glut and drive up prices and the tax revenue from crude would increase, the price of gas at the pumps would increase and those tax revenues would increase; so far it hasn’t worked.

The future of hold harmless looks bleak as does the future of Silver City. And the Town Council does nothing.

See crude oil price graph from 1946 to March 2017 Here

Author:  crow [ Thu Apr 27, 2017 10:02 am ]
Post subject:  Re: GRT/Sales Tax, Whats Really Regressive

Corrected to reflect the correct county hold harmless cut off of 48,000 (not 30,000).

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