It’s Not About The Size Of The Tax; It’s How You Use It

Los Alamos

Pending Council approval, Los Alamos County intends to raise the gross receipts tax (GRT) by 0.5%. What is particularly insidious about GRT is that — unlike a sales tax which transparently taxes only the final product or service — it taxes every transaction in the supply chain. Lawmakers like GRT because they can present a lower tax rate to appease the public while the effective tax rate compounds to a much higher rate by the time it reaches your local storefront. This process is illustrated in the graphic below. GRT imposes a significant cost on our community — especially for families, small businesses, and fiscal accountability — violating the County’s strategic priorities. While most governments have repealed GRT to encourage economic growth, why is Los Alamos County doing the opposite?

One of the main problems with GRT is that lower-income and age brackets are disproportionately impacted by it. Not only is this because everyone is taxed at the same rate regardless of income, but young families are also paying for more GRT-eligible goods and services. For example, they are buying family-friendly vehicles, hiring childcare, replacing outgrown clothes, paying academic and athletic fees, and consuming more utilities. This results in reduced income for these families already more impacted by inflation – further reducing their quality of life and the community’s economic vitality — also part of the County’s strategic priorities. Despite being more affected by GRT, families are often not benefiting more from it, as they are too busy working and taking care of their families to have time to advocate for their interests in public policy. Meanwhile, those who have already amassed wealth and GRT-eligible property are not paying proportionately and have all the time in the world to figure out how to spend these newly acquired funds in their interests. That doesn’t sound very equitable – also a County strategic priority.

Regarding economic vitality, small businesses are also disproportionately impacted by gross receipts taxes because they have smaller profit margins to absorb costs and fewer resources to find tax loopholes than large corporations. A great example of this is child care, where there is already an enormous shortage due to the disparity between what it costs to hire a qualified provider and the price people are willing to pay for it, due to lack of income or perceived value. Small businesses can pass the cost to customers, making them less competitive. They can also cut costs by reducing employees or moving to a more business-friendly environment. In the end, GRT hurts business revenue which means less tax revenue.

Finally, governments that rely on increasing taxes to generate tend to be complacent and fiscally irresponsible. This leads to wasteful spending, unnecessary bureaucracy, and an overall lack of accountability to taxpayers. There are many equitable alternatives to raising taxes, such as cutting spending, selling property, increasing usage fees, or issuing bonds. Furthermore, successful governments prioritize spending on the welfare of their working class by ensuring equitable access to housing, healthcare, education, employment, and other opportunities. They do not spend frivolously on more consultants for more capital investment projects when they struggle to manage or staff the responsibilities they already have. Here’s something to consider: Los Alamos County spends significantly more per capita than other counties with FFRDCs and mountain towns. Does that spending reflect a greater economic vitality, recreational facilities, public transit, and other quality-of-life measurements? Or does it simply reflect the degree of apathy and lack of accountability?

In conclusion, the negative impacts of gross receipts taxes on families, small businesses, and fiscal accountability should be clear. Instead of relying on these taxes, policymakers should consider implementing more equitable and sustainable tax policies that prioritize the needs of their constituents and promote long-term economic growth. I know you are busy working, raising families, and otherwise contributing to this community, and that’s why you elected people to represent you. Still, I encourage you to remind your elected and appointed representatives of their duties to the families and businesses of Los Alamos and White Rock by emailing them. Even better, tell them during the public comment at the beginning of each Council session on Tuesday evenings at 6:00 pm.