Gross Receipts Tax Increase Unneeded, Should Be Rejected

Former Los Alamos County Councilor
Los Alamos

On June 27, our County Council will consider a half-percent increase in our local gross receipt tax (GRT) rate. It should be rejected.

Governments provide essential and beneficial services and impose taxes to pay for them. A few tax rate increases are justified. Most are not, although specious arguments are always made that they are needed to provide some essential or popular service.

This proposed increase is unique in that no argument is made that it is needed. Instead, it is proposed to increase County government revenues NOW in case they drop LATER.

Our County government is already awash in money. It can’t spend it fast enough.

Most of the County’s General Fund (GF) revenues come from GRT, mostly from LANL. With the sharp increase in LANL budgets in recent years, County revenues have risen dramatically. In the past five years, County GRT revenues have risen from $42M to $75M, an increase of 79%! Not surprisingly, County GF spending has also gone up – by 61%. The budget Council adopted in April would increase spending next year by another 14%.

So, why a tax increase?

The County government is concerned that in three to five years LANL may reclassify some of its work to “manufacturing,” which is not subject to GRT. It projects GRT revenue might fall back to levels still above today’s.

County fiscal planners deserve credit for thinking ahead. But the proposed solution is the wrong approach. The obvious way to prepare for a possible revenue decline is to restrain spending. It is far, far easier to hold spending down than to cut it if revenues drop. Indeed, increasing GRT now would likely exacerbate the problem because new revenues will almost certainly encourage even more new spending before cuts hit, if they actually do.

If Council does not reject this proposal outright, it should at least condition its imposition on a trigger so it would only go into effect if GRT revenues really do drop significantly.

Why should we care? While LANL pays most GRT, County residents pay roughly a quarter. And money from LANL is not free. It comes from U.S. taxpayers or, in reality, our grandchildren who will inherit the national debt. It also makes our struggling local businesses less competitive, contrary to Council’s professed priority to “encourage, facilitate, and assist” them.

We all lose if this unneeded tax increase is imposed.