1 new mexico’s tax system in a national context nmtri annual tax policy conference may 2011 joseph...

1

New Mexico’s Tax System in a National

ContextNMTRI Annual Tax Policy

ConferenceMay 2011

Joseph HenchmanVice President of Legal & State Projects

Tax [email protected]

www.TaxFoundation.org

About the Tax Foundation• 74 years of objective data and analysis

– Founded in 1937• Independent researchers gathering data and • Providing objective information to counsel

government, business, and citizens on public finance

– Federal, state, and local tax issues– Testimony, newspapers, radio, television,

website, and mass distribution of our publications to policymakers and general public

– Non-profit, non-partisan 501(c)(3)• Advocate of a principled approach to tax

policy, based on economic research

2

Principles of Sound Tax Policy

SimplicityAdministrative costs are a loss to society, and complicated taxation undermines voluntary compliance by creating incentives to shelter and disguise income.

TransparencyA good tax system requires informed taxpayers who understand how tax assessment, collection, and compliance work, with open hearings and fully explainable and replicable estimates.

NeutralityThe fewer economic decisions that are made for tax reasons, the better. The primary purpose of taxes is to raise needed revenue, not to micromanage the economy. The tax system should not favor certain industries, activities, or products.

StabilityWhen tax laws are in constant flux, long-range financial planning is difficult. Lawmakers should avoid enacting temporary tax laws.

3

Tax Foundation Annual Studies

• Facts & Figures– Rates, collections data, and rankings for

each state and each type of tax• Plus state debt, average local sales

taxes, lottery revenue• New this year: cell phone taxes

– First published in 1941– 15,000 print copies &

100,000 downloads each year– Buy on Amazon for $3;

contact us for bulk pricing

4


• Tax Freedom Day– Estimate of how long Americans have to work into the

year to pay their combined federal, state, and local tax bill

•Tax Freedom Day 2011: April 12– 102 days into the year; 27.7% of income; +3 days from ’10– Recession reduction of tax revenues, extension of 2001-03

tax cuts, new payroll tax cut

• Two weeks earlier than latest ever in 2000 (May 2)• Tax Freedom Day including federal deficit: May 23

– Each state has a Tax Freedom Day•New Mexico: March 31• Earliest: Mississippi (March 26)• Latest: Connecticut (May 2)

5


• Tax Freedom Day

6


• State-Local Tax Burdens– Percent of residents’ income paid in taxes

• Adjusts for tax burden exporting by states• More relevant than collections divided by income

(Alaska has highest tax collections but Alaskans have lowest tax burden)

– Does not account for value of government services or regulatory benefits/costs or tax collection efficiency

– U.S. Average (2009): 9.8% ($4,160)• Highest: New Jersey: 12.2% ($6,751)• Lowest: Alaska: 6.3% ($2,973)• New Mexico: 8.4% ($2,997) – 41st highest

– Historical data for each state back to 1977• New Mexico rose sharply in the 1990s and then dropped

7


• State-Local Tax Burdens: New Mexico

8


• State Business Tax Climate Index– How states raise their taxes– Ranks the competitiveness of the 50 state tax

systems and provides roadmap for improving– Overall rank and five subindex ranks

• Individual income tax, Corporate income tax, Property tax, Sales tax, and Unemployment Insurance tax; 112 variables

– 2011 Index (using July 1, 2010 snapshot):• New York worst, South Dakota best• New Jersey (48th) not worst for first time since 2006• New Mexico: 33rd

– CIT (31st), IIT (20th), Sales (45th), UI (16th), Property (1st)

9


• State Business Tax Climate Index 2011– Utah: 9th

– Texas: 13th

– Colorado: 15th

– Oklahoma: 30th

– New Mexico: 33rd

•CIT (31st), IIT (20th), Sales (45th), UI (16th), Property (1st)

– Arizona: 34th

10

Tax Foundation Regular Studies

Sources of Revenue

New Mexico:– IIT (15.7)– CIT (4.6%)– Sales (35.7%)– Property (14.5%)– Other (29.5%)

11

Source: Tax Foundation calculations based on data from Census Bureau state and local government finance data for fiscal year 2008.


• Tax Collections– State Individual Income Tax Collections

• New Mexico: $467 (40th)

12

State Collections per

capita(2009)

Rank(2009)

U.S. $805 --

New York $1,889 1

Connecticut $1,816 2

Massachusetts $1,614 3

Oregon $1,429 4

Minnesota $1,324 5


• Combined State & Average Local Sales Tax

13

State Rate Rank

Tennessee 9.44% 1

California 9.08% 2

Arizona 9.01% 3

Louisiana 8.69% 4

Washington 8.61% 5

Source: U.S. Census Bureau; Tax Foundation; Sales Tax Clearinghouse

Select Cities:New York City 8.875%Los Angeles 9.75%Chicago 9.75%

• NM: 5.125% state + 2.01% average local = 7.11% combined (18th)

• NM’s GRT is one of the broadest sales taxes in the United States.


• State Corporate Rates in International Context

14Source: OECD; Tax Foundation. 2011 Data

OECD Overall Rank Country/State

Federal Rate 2010

Top State/Provincial Corporate Tax

Rate

Combined Federal and State Rate (Adjusted)1

Iowa 35 12 41.6

Pennsylvania 35 9.99 41.5

Minnesota 35 9.8 41.4

Illinois 35 9.5 41.2

Alaska 35 9.4 41.1

New Jersey 35 9.36 41.1

Rhode Island 35 9 40.9

Maine 35 8.93 40.8

California 35 8.84 40.7

Delaware 35 8.7 40.7

West Virginia 35 8.7 40.7

Indiana 35 8.5 40.5

New Hampshire 35 8.5 40.5

Vermont 35 8.5 40.5

Massachusetts 35 8.25 40.4

Maryland 35 8.25 40.4

Oregon 35 7.9 40.1

Wisconsin 35 7.9 40.1

Nebraska 35 7.81 40.1

Idaho 35 7.6 39.9

New Mexico 35 7.6 39.9

Connecticut 35 7.5 39.9

New York 35 7.1 39.6

Kansas 35 7 39.6

1 Japan (2010 Rates) 30 11.51 39.54

OECD Overall Rank Country/State Federal Rate 2010

Top State/Provincial Corporate Tax Rate

Combined Federal and State Rate

(Adjusted)1

Arizona 35 6.97 39.5

North Carolina 35 6.9 39.5

Montana 35 6.75 39.4

2 United States 35 6.56 39.3

Alabama 35 6.5 39.2

Arkansas 35 6.5 39.2

Tennessee 35 6.5 39.2

Hawaii 35 6.4 39.2

North Dakota 35 6.4 39.2

Missouri 35 6.25 39.1

Georgia 35 6 38.9

Kentucky 35 6 38.9

Oklahoma 35 6 38.9

Virginia 35 6 38.9

Florida 35 5.5 38.6

Louisiana 35 8 38.5

Mississippi 35 5 38.3

South Carolina 35 5 38.3

Utah 35 5 38.3

*Michigan 35 4.95 38.2

Colorado 35 4.63 38.0

*Texas 35 0 35.0

*Washington 35 0 35.0

*Ohio 35 0 35.0

Nevada 35 0 35.0

South Dakota 35 0 35.0

Wyoming 35 0 35.0

3 France 34.43 34.4

Tax Foundation Interactive• Property Taxes on Owner-Occupied Housing

• New Mexico among the lowest (0.55%; $880, 42nd)• Visit interactive.taxfoundation.org for data by county

15

State Median Real Estate Taxes

Paid (2009)

Rank

New Jersey $6,579 1

Connecticut $4,738 2

New Hampshire $4,636 3

New York $3,755 4

Rhode Island $3,618 5

U.S. Average $1,917 --

Source: U.S. Census Bureau; Tax Foundation. Property taxes paid by renters, businesses, and others are excluded.

Tax Foundation Interactive• State-to-State Migration Data

• Visit interactive.taxfoundation.org for online tool16

Tax Foundation Interactive• State Spending Calculator (TABOR)

• Visit interactive.taxfoundation.org for the calculator17

18

Specific Tax Policy Research Areas

Income Taxes•Structure/Justifications•Brackets/Progressivity•Credits/Deductions/Exclusions•Capital Gains•“Jock” Taxes/Nonresident Taxes•Local Income Taxes

Miscellaneous•“Tourist” Taxes (Hotel, Meals, Car Rental)•Cell Phone/Telecom•Unemployment Insurance•User Fees/State Enterprises•Lotteries/Gambling•Redistribution Issues•Taxes vs. Fees•Taxpayer Protections•Constitutional Powers & Rights

Sales TaxesSales Taxes•Broad Bases/Low Broad Bases/Low Rates/Inputs Rates/Inputs•VAT/FairTax/SSTPVAT/FairTax/SSTP•Sales Tax HolidaysSales Tax Holidays•Grocery & Clothing Grocery & Clothing Exemptions Exemptions•Use TaxesUse Taxes•““Amazon” Taxes/Nexus Amazon” Taxes/Nexus Issues Issues•Gross Receipts TaxesGross Receipts Taxes•Local Option Sales Local Option Sales TaxesTaxes

Excise TaxesExcise Taxes•History & Purpose/ History & Purpose/ “Pigouvian” Taxation “Pigouvian” Taxation•CigaretteCigarette•AlcoholAlcohol•Gasoline/Tolls/Gasoline/Tolls/Charges/CarCharges/Car•Obesity/Soda/Sugar/SaltObesity/Soda/Sugar/Salt•Plastic Bags/Bottled Plastic Bags/Bottled WaterWater

Business TaxesBusiness Taxes•Incidence of Corporate Incidence of Corporate Taxation Taxation•Corporate Form/Pass-Corporate Form/Pass-ThruThru•DepreciationDepreciation•““Loopholes”Loopholes”•Incentives: R&D, Job Incentives: R&D, Job Creation, Investment, Creation, Investment, FilmFilm•Franchise TaxesFranchise Taxes•Inventory/Capital Stock Inventory/Capital Stock TaxesTaxes•Severance TaxesSeverance Taxes•AmnestiesAmnesties•High Federal RateHigh Federal Rate

Property & Wealth TaxesProperty & Wealth Taxes•Assessments & Assessments & LimitationsLimitations•Commercial vs. Commercial vs. ResidentialResidential•Personal Personal Property/TransferProperty/Transfer•TIFs and PILOTsTIFs and PILOTs•Estate/Inheritance/GiftEstate/Inheritance/Gift

19

New Mexico’s Tax System in a National

ContextNMTRI Annual Tax Policy

ConferenceMay 2011

Joseph HenchmanVice President of Legal & State Projects

Tax [email protected]

www.TaxFoundation.org

1 new mexico’s tax system in a national context nmtri annual tax policy conference may 2011 joseph...

Documents

tax assessment

tax cuts

type of tax

tax reasons

local tax bill tax freedom

highest tax collections

good tax system

lowest tax burden