This may finally be the year New Mexico’s corporate tax loophole dies a much-deserved death.
The origins of the loophole are a mystery, concealed by spooky shadows. “It just appeared,” said Sen. Peter Wirth. “I’ve never been able to figure out where it came from.”
In 23 states, including all the nation’s western states but New Mexico, multi-state corporations – big-box chains like Walmart or Verizon – pay a state-specific tax on their profits. Because of a loophole in this state, corporations here can transfer otherwise taxable money out of New Mexico to avoid paying corporate taxes. Companies based here don’t have the same option.
This is costing us tens of millions of dollars, Wirth said, and he’s crafted Senate Bill 9 to combat the practice of huge businesses funneling New Mexico profits elsewhere so they can’t be taxed. SB9 requires a “combined return” that accounts for the state’s share of
“To me, it’s a fundamental fairness issue,” Wirth said. When employees at local New Mexico banks, for instance, look out their office windows at the nation-wide megabank across the street, they’re seeing a
competitor who doesn’t have to pay taxes the smaller bank is on the hook for. Wirth’s bill takes away that advantage for chain companies.
If the idea sounds familiar, that’s because this is the eighth straight year Wirth has attempted to get this loophole-killing bill made into law. It continues to be modified, and at this point it doesn’t just eliminate the loophole, it lowers the overall corporate
tax rate. Companies will pay 7 percent on profits over $1 million (down from 7.6 percent), 5.8 percent on profits between $500,000 and $1 million (down from 6.4) and 4.2 percent on profits under $500,000 (down from 4.8).
The idea is to help businesses by lowering the tax, while making more money by broadening who pays.
“This helps the Governor,” Wirth said, of Gov. Susana Martinez. “I support her idea to give businesses that hire veterans a tax break, but let’s pay for it.”
Under the weight of corporate lobbying and ideological opposition (the Grover-Norquist crowd that sees every closed loophole as a tax increase, which Norquist calls “stealing”), SB9 has died in committee every year.
Things may change this year, though, as grassroots support for this bill is larger than ever. MoveOn.org is backing Wirth’s efforts, and MoveOn coordinator Steven Mayes said when the bill gets its hearing
with the Corporations Committee (Wirth said a debate is scheduled for Wednesday), he’ll have a contingent of SB9 fans in the audience.
“Senator Wirth has kind of been a lone wolf out in the wilderness, trying to change this,” Mayes said. “He’s never had citizen involvement like this.”
Thirty-six thousand MoveOn members in New Mexico have SB9’s back, Mayes said, and they’re coordinating with other grassroots groups to keep as many as a quarter-million people in the loop on what happens
to SB9. Wavering legislators can expect droves of phone calls and emails about the bill.
Democratic leadership has also said Wirth’s bill is among its highest priorities at the current legislative session.
“These big-box companies take all their profits out of the state,” said Mayes. “Local business owners reinvest in this state, so that money stays here. There’s been all these cuts (since the recession), but there’s never been a citizens’ effort to say ‘We don’t need more
cuts. We have the money, it’s just not going to the right places.’