NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

The LFC is only preparing FIRs on bills referred to the Senate Finance Committee, the Senate Ways and Means Committee, the House Appropriations and Finance Committee and the House Taxation and Revenue Committee. The chief clerks are responsible for preparing and issuing all other bill analyses.

Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Room 416 of the State Capitol Building.

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

This bill would provide a tax credit to retail food stores. Food stores in municipalities would receive a 3.775 percent credit and food stores outside municipal boundaries would receive a 5.0% credit.

FISCAL IMPLICATIONS

This proposed legislation would reduce general fund revenues by $65.4 million dollars (recurring).

A municipal tax credit of 0.5% pursuant to 7-9-82 NMSA 1978, in addition to this proposed legislation, would slightly increase revenues to a municipality.

ADMINISTRATIVE IMPLICATIONS

Unknown at this time. The Taxation and Revenue Department (TRD) reports that Y2K readiness at TRD may delay the programming changes that would be necessary by the date of enactment. The audit division of TRD would have to perform additional audits on food stores.

OTHER SUBSTANTIVE ISSUES

Of concern is the fact that the tax savings may or may not be passed onto the consumers, leaving the possibility that a relatively small sector of the population (retail food store owners) to gain from this proposed legislation.

The reliability of the gross receipts tax as a revenue source and a key variable in making state revenue forecasts, will slowly be compromised as additional tax exemptions are made into law. While New Mexico is one of the only states that taxes food, New Mexico relies more heavily on gross receipts tax collections for revenue than other types of taxes. In order to keep states revenues relatively unchanged, sharp decreases in one kind of tax will have to be offset by increases in other types of taxes (i.e., income taxes and/or property taxes).

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