Questions about proposed city tax hike

Let’s start with this: The city budget will never be large enough to address all of its needs. And so, it’s not surprising that public support for a proposed increase in the gross receipts tax goes up when people learn how the money could be used.

A recent survey conducted by the city found that 63 percent of residents support an increase in the GRT. If the issue goes to a vote, which appears likely, I’ll be stunned if the actual support is anywhere near that high.

The survey was not a straight yes or no on the increase. It started by asking voters how they would spend the money. Then, once they secured that investment, they found voters were more likely to support the increase.

But that’s not how GRT works. It’s not like a bond approved by voters where the money is tied to a specific project. GRT is a recurring revenue source that can be used by city officials any way they want.

It’s no surprise that public safety, parks and recreation and quality of living topped the list of survey respondents. There are legitimate needs in all of those areas that could be addressed by the tax hike.

My only questions are, does the city need to increase taxes at a time when the budget is already growing dramatically from year to year? And will a GRT hike, combined with inflation, do more to harm low-income consumers than the benefits they receive through the city?

A few weeks before receiving the survey results, the city council approved a $596 million budget for fiscal year 2025. There were 21 new positions added, with spending for the general fund up by 8.8 percent from the previous year.

The city budget in 2020 was $410 million, according to the city’s “budget book” posted online.

The gross receipts tax in New Mexico is different from the sales tax that is collected in most other states. A sales tax is paid by the customer on each individual sale. The GRT is paid by the business, and applies to not only the sale of tangible goods but also to services such as research and development. That allows for collection on federal government transactions that would be exempt from a traditional sales tax.

The state Legislature determines the GRT rate at the state level and the maximum allowed at the local level. In 2022, it lowered the state rate for the first time in 40 years, going from 5.125 percent to 4.875 percent. That had little impact on the state budget, which grew by 5.9 percent this year to more than $10 billion for the first time ever.

The GRT rate in Las Cruces is less than the top rate allowed by the state and comes in under that of several other New Mexico cities.

The city council has two potential means for raising the GRT. They can put the issue before the voters, with the potential to increase the rate by 0.32 percent to bring in about $11 million in new revenue. And they can simply pass a 0.27 percent rate hike themselves by ordinance, adding about $9 million.

To their credit, city council members appear inclined to let the voters speak first. If voters support the increase, councilors should have no concern about acting by ordinance to gain the maximum advantage. But if the increase is voted down, council members should respect that decision and keep the rate where it is now.

Either way, the city budget would appear to be doing just fine. 

Walter Rubel can be reached at waltrubel@gmail.com.