Legislative Finance Committee estimates hundreds of millions in unpaid taxes

Legislative Finance Committee estimates hundreds of millions in unpaid taxes

However, New Mexico’s Tax and Revenue Secretary, Stephanie Schardin Clarke, calls the LFC’s numbers just a rough estimate. “All that has to do with the fact that our economy as grown and so more personal income taxes and gross receipts taxes were owed today than in 2016,” said Schardin Clarke. “And so it’s not necessarily a signal that a greater share of taxes are going unpaid, it’s just there are more taxes so naturally the unpaid amount grows with that.” According to an LFC newsletter, New Mexico’s so-called ‘tax gap’ which is what taxpayers owe but do not pay, has grown over the past five years from roughly $635 million owed to $743 million. That’s money that could boost a lot of state programs.

It’s unclear what is the exact amount of our tax gap but regardless, the LFC warns that taxpayers who dodge their responsibilities, force the state to raise taxes to support government services. Which ultimately, places a bigger burden on law-abiding taxpayers. “You can’t get away from the fact there is some willful noncompliance,” said Schardin Clarke. “There are some taxpayers out there that commit civil or criminal fraud and truly do evade their responsibilities as taxpayers but they’re very few and far between and so we’re focused on them. But we’re truly very focused on making it easy to voluntarily comply and pay your obligations correctly the first time.”

The Secretary said the LFC’s methodology estimating some tax gaps are based on an old study that might not be useful for today’s calculations and adds that the LFC’s estimate doesn’t include the Department’s input or data. “Certainly there is a tax gap and some amount of gross receipts tax that is uncollected,” said Schardin Clarke. “I would just caution anybody from taking that number without a grain of salt.”

The newsletter also said the Tax and Revenue Department has fallen behind on collecting unpaid taxes. The Secretary said staffing has been an issue and the pandemic paused a lot of their aggressive collections techniques like placing liens and garnishing wages. But with a new fiscal year and pandemic restrictions lifted, they’ve resumed those techniques. The full LFC report is scheduled to be released this week.

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