Posts Tagged ‘Taxes’

Finding Untapped Cash for State Government

Thursday, January 13th, 2011

Have you ever tried to explain New Mexico Gross Receipts Tax (GRT) to a business person not from New Mexico? They just don’t get it. This is especially true for businesses who do business with the federal government.  Mention GRT, and they’ll tell you they have an exemption from charging sales tax to the federal government. It is a completely foreign concept. In other states, they have sales, and you can’t charge the federal government sales tax. That’s why we have gross receipts tax in New Mexico. So much of our eco0nmy is based on federal dollars that the State had to figure out a creative way to collect taxes on that exchange of dollars.

But, what about those out of state companies that do business with federal agencies in New Mexico? Do they know they have a GRT liability. I’m willing to bet the vast majority of them don’t. In fact, if they’re bidding against a New Mexico company  for work at a federal facility in New Mexico, they’ve got a built in competitive advantage. You see, out of state companies have the lowest GRT rate in the state. In some case that advantage can translate into a 3% difference. Don’t believe me, download the tax rate table and see for yourself.

Now, that assumes that the out of state company is registered to do business in New Mexico and is actually paying GRT, which I believe would actually be the exception rather than the rule. In fact, if they’re not factoring in GRT, they may find themselves with 8% or greater competitive edge over their New Mexico competitors. Just in case some of you might think I’m making this up, let’s just take a look at a recently awarded federal contract:

Title:                 Tower Relocation Project
Sol. #:                AG-7512-S-10-0036
Agency:                Department of Agriculture
Office:                Forest Service
Location:              R-3 Southwestern Region/Lincoln NF
Posted On:             Jan 11, 2011 4:49 pm
Current Type:          Award
Base Type:             Presolicitation
Base Posting Date:     Aug 10, 2010 4:54 pm

Click the link, and you’ll find this $29,500 contract was awarded to Jim and Martha Flake of Clarksville, Tennessee.  I don’t know the Flakes, and I’m sure they are hardworking people. But what I do know is that a quick search on the Corporations page at the NM PRC, doesn’t show them registered to do business in New Mexico. So, if they’re not even registered to do business in the State of New Mexico, does anyone believe they are actually going to pay GRT?

Yeah, me neither.

So, here’s a revenue generating idea for the good folks in Tax and Rev: Start monitoring which out-of-state firms are winning federal contracts in New Mexico, and while you’re at it, maybe you want to use some of the free tools available to figure out which of those firms that have won contracts in the Land of Enchantment in the past have actually paid the GRT that New Mexico contractors have to pay.

Just a thought.

It’s a Bond, Not a Tax Increase

Wednesday, January 12th, 2011

Governments love to issue bonds for projects. Usually these push for new bonds are accompanied by claims that new bonds will not raise our taxes. But, what happens when the state and local governmental entities that push for the bonds ends up unable to pay for it?

The $2.9 trillion municipal-bond market has been stung recently by worries that some cash-strapped cities or states won’t be able to pay off or roll over debt. Costs have risen broadly for municipal borrowers. The market also faces challenges from the expiration of the Build America Bonds program, which helped cities and states borrow $165 billion at interest rates held down by federal subsidies.

Can you say, “Tax increase?”

The Civilized European Approach

Tuesday, January 11th, 2011

For those in this country who would like to see America move towards a more “civilized” European approach to governance:

A Swiss village has found a drastic way to compel dog holders to pay their pet’s annual tax: cough up, or the dog gets it.

Reconvilier — population 2,245 humans, 280 dogs — plans to put Fido on notice if its owner doesn’t pay the annual $50 tax.

Local official Pierre-Alain Nemitz says the move is part of an effort to reclaim hundreds of thousands of dollars in unpaid taxes.

He says a law from 1904 allows the village to kill dogs if its owner does not pay the canine charge.

After all, people need to pay their fair share, right?

The Road Most Recently Traveled

Monday, December 13th, 2010

An interesting question:

Does a one-parent family of three, making the minimum wage of $14,500 a year, have more disposable income than a family earning $60,000 a year?

That’s the provocative claim made by pseudonymous blogger Tyler Durden at the popular finance blog Zero Hedge. Durden produces a chart that compares inputs like income, payroll and federal income taxes, child care costs, and welfare benefits from programs like Medicaid and the Children’s Health Insurance Program for theoretical families of various income levels in Mississippi.

The calculation yields an “economic benefit” of $37,777 a year for the family making minimum wage but only $34,366 for the family making $60,000 a year. The analysis also indicates that a family provider working only one week per month at minimum wage will make 92 percent as much as the provider earning $60,000 a year as a result of savings on child care and Medicaid’s low deductibles and copays.

Some questions are raised about the origins of the analysis on which this is premised, but this does seem to be the general direction in which the country has been heading.

Crippling 1099 Change Slipped into Law

Tuesday, May 25th, 2010

What happens when you pass a 2,409 page health care overhaul bill into law? All kinds of terrible things. No, this is not a post about the merits of the health care “reform” that the Democratic Congress and our President force fed to the American people. Instead, this is a perfect example of why Americans should just tell their elected representatives, “No!” anytime they want to pass legislation into law weighing in around twenty pounds  and containing more pages than the Bible.

See, invariably, when that many pages is included in a law, it’s going to do a WHOLE LOT MORE than it is purported to do. It’s going to do things that have absolutely nothing to do with its stated purpose.  Case in point, let’s look at one of the non-healthcare aspects of this new law with which we’ve all been sadled:

An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork.

Section 9006 of the health care bill — just a few lines buried in the 2,409-page document — mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

The full negative impact of this new burdensome regulatory burden on the business community will go into effect in just 18 short months. As a small business owner, I can unequivocally tell you this will be a truly devastating and production draining practice on America’s business community. A compliance demand by our federal government that will only serve to increase overhead expenses for every businesses – from the struggling artist to the multinational behemoth –  without adding the least bit of value.

Those of you that own or operate a small business already know how difficult it can be to stay afloat and compete in today’s economy, especially during tough times. Besides the regular day-to-day operations, there are all kinds of fees, taxes and other regulatory burdens that make doing business a challenge.

Can you imagine having to track and tally every single business purchase you make throughout the year and send 1099 forms to all of them? How about having to collect names and taxpayer identification numbers from every vendor or payee that you dealt with? Can you imagine how long it would take on the phone with Wal-Mart customer service to try to obtain the company’s tax ID? Multiply this by the other five hundred companies you do business with, and you start to get an idea of the new burden this is going to place on small businesses across America.

It’s going to take a whole lot more time to comply with these rules, and many small businesses will probably have to hire someone full-time just to take care of it all. The additional expense will either further strain companies who can take the hit (which will just drive up prices for consumers) or force them out of business. But no matter how you look at it, it’s a lose-lose situation for American businesses.

If you’re in business, now would be a good time to let your elected representatives – from county officials to the White House –  know that this is a bad regulation for America. It’s also a good wake-up call for every American.  The Democratic Congress and our President have encore performances of the healthcare sized legislation in the works. They’re eager to push financial “reform” and climate change  bills.

Well, I think its time to pass a new law. Simply stated,  if a bill is longer than the Constitution of the United States, it doesn’t even get printed – let alone come up for a vote.

You Can’t Handle the Truth

Thursday, May 13th, 2010

Leave it to our politicians to spin fairy tales that would make the Brothers Grimm green with envy. For example consider this promise by two senators pushing cost-spiking energy legislation:

Responding to critics who claim energy reform means increased costs and taxes, Kerry and Lieberman said energy-bill discounts and direct rebates would give back to consumers two-thirds of the proposal’s revenue that isn’t dedicated to deficit reduction. Additional tax cuts and an energy-refund program would help Americans “who may be disproportionately affected by potential increases in energy prices,” according to supporting documents Kerry and Lieberman supplied.

So, if consumers aren’t going to be on the hook, who is? The only thing worse than mail-in rebates used to sell products are government promised rebates to sell the “latest and greatest” harebrained scheme. Let’s consider this in the context of New Mexico. You might remember that not too long ago New Mexicans were given one time income tax energy rebates ranging between $64 and $289.

Yet, just five short years later, the government that gives in one-time rebates taketh away in recurring tax increases. The worse part is that what they take away in that additional year over year tax increase is always way more than what they gave us in the first place. It’s the government’s version of a car salesman’s four square worksheet game.

What Constitutes a War?

Monday, April 26th, 2010

It’s kind of interesting to watch the unfolding union created drama in Albuquerque as Mayor Berry makes the difficult decision to cut spending:

Union representatives, ticked off by Albuquerque Mayor R.J. Berry’s plan to cut city workers salaries, have come out swinging, calling the fight against the budget plan, war.

“Are we not at war?” Andrew Padilla asked.

So, help me understand this Mr. Padilla…

Mayor Berry proposes to keep union workers employed, but with a modest 3% pay cut, and you issue a battle cry.  However, nearly one out of ten people in Albuquerque are unemployed and a great many more are underemployed, and neither you nor your union leader brethren screamed and hollered when the legislature proposed one broad based tax increase on top of another.

How’s that work?

The Big Against the Small Continued

Thursday, April 15th, 2010

I’ve noted time and time again that a change has occurred in America that is quite unsettling.  The dynamic shift that concerns me is the alignment of big business and big government interests against those of small businesses and individuals. Now, maybe this has always existed, but I don’t think so – at least not to the level that is currently evident.

It used to be that government interests (tax collection and regulation) were contrary to the majority of business and individual interests, but this has now changed.  What has emerged is a return to days of old (i.e. landed aristocracy and ruling monarchs indenturing the masses and suppressing entrepreneurship).  Consider that “too big to fail” businesses are now encouraging increased taxation and regulation that will:

  1. stifle competition from upstarts with regulatory barriers to entry
  2. burden potential challengers with profit draining regulation
  3. create new revenue streams by artificially increasing costs of individuals (think cap and trade)

The latest evidence of this trend is the new compliance focus of the IRS:

A new study by the Transactional Records Access Clearinghouse (TRAC) shows that despite a growing federal deficit, IRS audit efforts aimed at the nation’s largest corporations have precipitously declined in the last few years and now are at an all time low.

According to Dean Zerbe, alliantgroup National Managing Director and former Tax Counsel on the Senate Finance Committee, “As if April 15th isn’t frightening enough for small business owners, now comes news that the IRS has increased audit hours for small and medium businesses by 30% over the last five years, while at the same time decreasing the number of hours spent auditing large corporations by 33%.”

Keep in mind, that taxpayer bailouts went to the largest of corporations.  Those same corporations are now reaping the rewards of free money:

For 2009, the Fortune 500 lifted earnings 335%, to $391 billion, a $301 billion jump that’s the second largest in the list’s 56-year history, approaching the increase in the robust recovery of 2003. 

Yet, this taxpayer investment into corporate profits has nothing to do with creating jobs for Mr. and Mrs. Taxpaying America.  In fact, the opposite has held true:

The number of Americans filing for unemployment insurance for the first time jumped for the second week in a row, according to government data released Thursday.

There were 484,000 initial jobless claims filed in the week ended April 10, up 24,000 from an unrevised 460,000 the previous week, according to the Labor Department’s weekly report. 

 And, it’s not just jobs that continue to disappear. Those losing their homes also continues to increase:

In the first three months of 2010 foreclosure filings rose 7%, to more than 930,000, compared with the previous quarter, according to the online foreclosure marketing firm RealtyTrac. That is a 16% jump over the first three months of 2009.

Foreclosures started off the first quarter with modest gains but spiked in March to a record 367,000 filings. Plus, nearly 258,000 of those filings were for bank repossessions, the highest quarterly total RealtyTrac has ever reported.

This is not good for America.

That’s Gonna Hurt

Thursday, March 25th, 2010

Individual Democratic legislators who caved to pressure from their leadership and voted to increase food taxes on struggling New Mexico families despite an overwhelming public outcry against it are rightfully starting to worry about their chances for re-election:

New Mexico legislators chafed at Gov. Bill Richardson’s veto Wednesday of a renewed tax on food, which averts a controversial tax hike but also eliminates $68 million meant to help balance the state’s $5.6 billion budget.

Legislators, who approved the food tax as part of a more than $230 million tax increase and budget plan during a special session earlier this month, complained that the second-term Democratic governor simply delayed tough decisions on fixing state finances until after he leaves office at the end of the year.

Hmm, that’s an interesting take from the legislators. Blame their unwillingness to cut unnecessary fat from government on the Governor.  Yeah, I don’t think that’s going to fly in November. Especially, when the campaign mailers uses quotes from Democrats saying that food tax should have never been sent to the Governor anyway.

They Went Ahead and Did It

Thursday, March 4th, 2010

It took three days of meetings behind closed doors for the Democratic leadership to make a monumental mistake and push through regressive tax increases on New Mexico’s working and non-working families:

The tax hike legislation included an increase in the statewide gross receipts tax, or sales tax, as well as a partial reimposition of the sales tax on food.

Members of the Republican minority harshly criticized the omnibus bill (SB10,12,13), arguing that the largest tax increase in recent history had been hatched without their input and that the tax changes should be considered separately.

The proposal would impose “a serious tax burden on New Mexico working families,” said Rep. Dennis Roch, R-Tucumcari.

House Speaker Ben Lujan, D-Santa Fe, said the tax increases were needed to avoid deep cuts to public schools in the 2011 budget year, which begins July 1. 

Of course, the Speaker’s excuse is total and complete nonsense. The tax increases pushed exclusively by the Democrats on everyday New Mexicans struggling to get through this economy that has left so many unemployed and struggling to pay for the basics, like FOOD, could not come at a worse time. More than half of the $200 million tax increases introduced are regressive in nature. Yet, we all know that almost an identical amount could have been easily cut from government:

The committee to improve government efficiency has delivered its final report to Gov. Bill Richardson, recommending cuts and consolidations that total $129 million.

The committee said there are too many state government employees. New Mexico has nearly 25 state employees for every 1,000 people. That ratio is higher than any state in the region and twice the national average.

So, please excuse us Mr. Speaker while we take umbrage with your attempt to pretend your putting our children first.  It is clear to everyone that patronage is the first priority of your caucus, and to heck with taxpaying New Mexicans.

Of course, you’ve got to love the irony of the fact that one Lujan expresses outrage at increases in healthcare premiums at the same time his father pushes tax increases on food for the same struggling families:

One New Mexico congressional representative expressed outrage at the increases in a statement.

“At a time when families throughout New Mexico are struggling to make ends meet, these rate increases are outrageous,” Rep. Ben Ray Luján, CD-3, said.

Maybe this family of politicians needs to caucus.