Reduce Gross Receipts Tax Rate
The bill's passage could significantly impact state revenue generated from these taxes. By lowering the tax rates, it may lead to decreased tax revenues initially. However, proponents argue that by incentivizing business growth, particularly in the manufacturing sector, HB219 could stimulate economic development leading to increased overall tax revenue in the long term. Additionally, the proposed deductions for professional services aim to mitigate tax pyramiding effects while making New Mexico more attractive for manufacturing investments.
House Bill 219 aims to amend taxation provisions in New Mexico by reducing the rates of the gross receipts tax and the compensating tax. Specifically, it proposes lowering the gross receipts tax from five percent to four and five-eighths percent, effective July 1, 2024. In addition, the bill intends to expand the deductions available for gross receipts and governmental gross receipts taxes related to the sale of professional services to encourage manufacturing and reduce overall tax burden for businesses in the state.
Notably, the bill has the potential to create points of contention among stakeholders. While supporters, particularly from the business sector, advocate for the reduced tax rates as a means to foster economic growth, critics may express concerns regarding possible budget shortfalls that could arise from the reduced tax revenue. Additionally, there may be debates about the effectiveness and reach of the deductions related to professional services, particularly concerning who qualifies and the implications for smaller businesses versus larger manufacturing entities.