Taxes And More Taxes!
By Dennis Domrzalski
MARCH 8, 1999: It happens all the time. You look at your pay stub, see the amount that the federal and state governments have taken out and you scream at the children, pets and bugs and damn the government for taking so much of your precious money.
But your pay stub tells you only part of the tax story. The fact is, government takes your money in dozens of other ways through myriad hidden taxes and fees.
In New Mexico there are taxes on gasoline, diesel fuel, hard liquor, beer, wine, cigarettes, property, hotel rooms, the purchase of motor vehicles, insurance premiums, personal income, corporate income, cows, sheep, estates, copper, oil and gas production, controlled substances, closed circuit TV productions, boats, tickets to horse racing tracks, railroad cars, liquor licenses and more.
There are also hundreds of fees levied by the state. There are fees for hearing aid dealers and fitters, barbers' licenses and interior design licenses.
Whether they're taxes or fees, they add to the cost of goods and services New Mexicans buy, and they mean that you wind up keeping less of your money. You might be surprised just how much money government taxes take out of your wallet.
The Washington D.C.-based nonprofit Tax Foundation estimates that state, federal and local taxes gobble up 35.1 percent of the average New Mexican's per capita earnings each year. According to the Foundation, that means a total tax bill of $7,340 out of a per capita income of $20,885.
On the national level, the Foundation says that the average American had to work 129 days last year to pay off their total tax bill. According to the Foundation, the average American had to work until May 10 in 1998 to achieve "Tax Freedom Day." In the 1930s, Tax Freedom Day for the average American was in mid-February. By the early 1960s, the Foundation says, it was in mid-April.
The Foundation calculates that Tax Freedom day in New Mexico last year was May 9, one day sooner than the national average. In this state, it takes an average of 83 days of work to pay off a worker's federal taxes and 45 days of work to pay state and local taxes, the Foundation says.
According to another tax group, Americans for Tax Reform, when all state, local and federal fees are entered into the equation, the average American had to work until June 25 in 1998 to pay the total cost of government.
The Tax Reform organization estimates that in 1998 it cost $1.03 trillion, or $3,083 for every person in America, just to pay for the regulatory functions of government.
Most of that $7,340 that the average New Mexican paid last year in taxes went to the federal and state governments in the form of income and other withholding taxes.
The federal government has five tax brackets. Depending on how much you make each year, the feds will take either 15, 28, 31, 36 or 39.6 percent of it. But that's not the only money that the feds take from you. The government withholds 6.2 percent of your paycheck for Social Security and 1.45 percent for Medicare.
The state is also in on the action. Depending on how much you make, the state of New Mexico will take up to 8.2 percent of your pay each year. That top rate kicks in at $65,000 for single people and at $100,000 for married people.
There are deductions you can make to lower your adjusted gross or taxable income. But if you fall into the federal government's lowest (15 percent) tax bracket, you are probably paying a total of 28.65 percent of your income to the state and federal government through those taxes.
Then there are hidden taxes, taxes you pay on a daily, weekly, monthly or yearly basis that you rarely think about.
The one that probably costs the most is the state's gross receipts tax, which is a sales tax on goods and services. In Albuquerque the sales tax is 5.8125 cents for every dollar spent. The city's economists estimate that each quarter-cent of that tax costs the average family, which the city defines as 2.7 people, $65 a year. At that rate, the city's average family pays $1,511 a year in sales taxes.
There are federal and state taxes on gasoline which now total 36.9 cents per gallon. If you buy 20 gallons every two weeks, you're paying $191 a year in gas taxes. Use 35 gallons every two weeks and your yearly gas tax bill is $335.
Homeowners and commercial property owners are hit with property taxes. Right now in Albuquerque, a home valued at $65,000 by the Bernalillo County Assessor's Office has a yearly property tax bill of $801. A home valued at $100,000 has a tax bill of $1,233. A commercial property in Albuquerque valued at $100,000 has a yearly tax bill of $1,401.
And just because you don't own property doesn't mean you're not paying property taxes. The taxes are most likely figured into your rent.
If you drink or smoke or do both, you're hit harder by taxes. State and federal taxes on cigarettes total 45 cents a pack. Smoke two packs a week and you're paying $48.60 a year in taxes for the pleasure of smoking.
Beer and wine drinkers are also taxed. State and federal taxes on beer total 99 cents a gallon. Drink two six-packs a week and not only will your liver turn into a hard crust, but you'll pay $57.91 in taxes.
Wine is taxed even more heavily--a total of $2.77 a gallon. Drink a gallon a month and your tax bill will be $33.24.
And don't even think of buying a motor vehicle. In this state, they're taxed at a rate of 3 percent of their sales price.
There are other taxes that you might not even know about. Decide that you need a nooner in a cheap or expensive hotel or motel with that special someone and, boom, you're taxed for it. That's right. Albuquerque has a lodgers' tax of 5 percent of the cost of the room.
Turn on the lights in your home or office or turn on the heat or dial the telephone or turn on the cable TV channels, and you're being taxed for it. The city charges the Public Service Company of New Mexico and other utilities what are called franchise fees. They are a charge to the company for using public rights-of-way to plant their poles and string their lines and wires. Typically, the city charges the companies a percentage of their gross sales. And, typically, those companies pass that "fee" directly on to customers.
Taxes, of course pay for things like roads, police and fire protection, schools and other government functions and services. But many people feel that when taxes are too high the economy suffers. Gov. Gary Johnson is one those people. He feels that the state's high personal income tax rate is hampering economic growth in the state. Johnson has said repeatedly that large corporations don't locate in New Mexico because the personal income tax is too high. The companies don't want their executives to be taxed out of their paychecks, Johnson has said. And those companies will locate in Texas, which has no income tax, or Arizona, which has a lower income tax, rather than in New Mexico, Johnson said.
So Johnson has proposed a plan to give state taxpayers $100 million worth of income tax cuts over a three-year period. Johnson also wants to reduce the income tax rate from the current high of 8.2 percent to 3.5 percent. But his proposal has stalled in the state legislature.
"New Mexico is one of the highest taxed states in the country," Johnson spokeswoman Diane Kinderwater said. "He [Johnson] does not support any tax increase. He never has during his first term in office, and he won't during his second term in office. He strongly favors a reduction in the state income tax. He calls that a raise for everybody.
"We often hear of legislators looking out for state employees and school teachers in terms of raises, but Governor Johnson says it is time that all New Mexicans get a raise."
Dr. Harry Messenheimer, of the New Mexico Independence Research Institute, believes that "taxes cause harm" and that companies and jobs will go to surrounding states that don't have such high taxes.
Messenheimer thinks that one reason taxes might be high in New Mexico is our high number of public employees. According to the New Mexico Department of Labor, 180,900, or 25 percent of the state's 730,900 jobs, are government or public sector jobs. The national average is around 12 to 14 percent, Messenheimer said. That high rate of public sector employment might not be so bad if all of those employees provided excellent services, Messenheimer said. In his opinion, however, government services here are not as good as they should be.
But this talk about New Mexico being the highest taxed state is disputed by many. For instance, according to the National Taxpayers Foundation, New Mexico is 20th among the states when it comes to the amount of per capita income that goes toward taxes.
Wisconsin residents pay 37.3 percent of their per capita income into taxes, the foundation says. In Minnesota it's 37.2 percent, while in New Jersey and New York it's 37 percent
Economist Brian McDonald of the University of New Mexico's Bureau of Business and Economic Research says that the tax bite for New Mexico's low and middle income people is about average.
"It's not the lowest, but it's not the highest," McDonald said, adding that although the individual income tax might be high, the state's property and gross receipts taxes are lower than those in surrounding states.
McDonald also disagrees with Johnson about the impact of the income tax on the state's economy. "I don't think there is any conclusive evidence that it affects economic development," he said. "Texas has no income tax, but their per capita income is average, and South Dakota has no income tax, but they are 38th in terms of per capita income."
McDonald also said that New Mexico's wealthiest people probably don't pay the 8.2 percent income tax rate because wealthy people tend to itemize their deductions on their federal income tax returns. That means they can deduct some of their state income tax on their federal returns. McDonald said that the state's wealthiest people probably pay about 5 percent in state income taxes.
So this April 14 when you're mailing your check off to the IRS and to the state, remember how much money they're taking.
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