A new tax proposal, introduced on Thursday by Rep. Tom Taylor and Sen. Bill Sharer, both Farmington Republicans, would replace the state's gross receipts tax system with a 2 percent across-the-board consumption tax and cut out all but a handful of other taxes.
"I am proposing what I call a hard reboot of the tax system," Sharer said. "The idea is that this is a revenue neutral bill, and it spreads (the tax base) out over a much wider range."
Some local officials advised caution and said the proposal would require careful study to ensure there are no unintended consequences.
The bill would also eliminate personal income tax, corporate income tax, compensating tax for businesses and about 100 special sales taxes such as the convoy tax and the vehicle excise tax.
"Over the years, we have continued to narrow the (tax) base and raise rates," Sharer said. "We have a number of credits and deductions. It's a continuing problem."
Sharer and Taylor are not alone in their concerns.
City councilman Dan Darnell, who also serves on the New Mexico Municipal League, agreed that the gross receipts tax system has to be changed.
"It was designed as a broad-based tax ... kind of a flat tax on everything," Darnell said. "Over the years, we have taken sectors out, narrowing (the base).
Under the gross receipts tax system, the state collects the tax and makes annual payments to cities and counties around the state. However, medical and food expenses have been exempt for a number of years and the state reimburses local governments for that lost revenue with so-called "hold harmless" payments. Farmington's payments have totaled about $4 million per year, Darnell said.
Legislators, however, should be cautious as they consider the tax changes, Darnell said.
"I'm not throwing stones at (the proposal), but we need to look at what the effects would be down the line," he said.
Careful study of how the proposal would affect cities' ability to maintain roads, parks, water lines and other infrastructure or services is needed before moving forward, he said.
"These are essential services," Darnell said, "everything from libraries to law enforcement."
City Manager Rob Mayes echoed many of Darnell's concerns.
"My concern remains that the legislature take no action that would harm the current tax revenue to municipalities," Mayes said. "I have a high amount of confidence (in Sharer and Taylor), but I am not familiar with the specifics of the proposal."
However, the 207 page proposal, Senate Bill 368, may already be encountering legislative difficulties.
Sharer originally hoped to recruit one of his Democratic colleagues to co-sponsor the bill, but turned to Taylor after talks with Sen. Peter Wirth, D-Santa Fe, fell through.
Wirth could not be reached for comment on Thursday.
Sharer and Taylor were uncertain of the bill's future.
"We're going to do our best, but we don't really have dreams of it passing," Taylor said. "We want to have a good discussion."