By Fred Nathan

It is always bad tax policy to tax necessities. The Legislature recognized this truth in the 1998 session when it wisely removed the gross receipts tax from prescription drugs. Food, like prescription drugs, of course, is a basic necessity.

Yet New Mexico continues to exempt horse feed from the gross receipts tax, while baby food takes the full gross receipts tax hit.

Repealing the food tax would effectively increase the paycheck of working middle class New Mexico families by more than $225 each year.

Some might wonder why we even have a tax on food in New Mexico. The answer is that the Legislature enacted it in 1933, following the lead of Mississippi in 1930, as part of a “temporary” emergency measure to compensate for a severe shortfall in government receipts caused by the Great Depression.

Unfortunately, even though the Great Depression ended a long time ago, the food tax has endured. In fact, it has more than doubled in the intervening seven decades.

In 1958, 41 states taxed food. Since then, however, the states have moved steadily in the direction of exempting food from tax. In the past six years alone, Georgia, Louisiana, Missouri, North Carolina and Virginia have acted to abolish, phase out, or reduce their tax on food.

That leaves New Mexico in the company of only nine states, including Mississippi, which continue to fully tax food.

Other states have discovered that the food tax is a weak foundation on which to base essential government services. This is because food tax revenue grows so much more slowly than state government spending. In New Mexico, revenue from the food tax has grown at only a 1.7% annual rate over the past decade, according to the Taxation and Revenue Department, while state government spending grew at a rate in excess of 4.5% during the same period.

If New Mexico relies on the food tax to fund vital programs and services, it will either have to continually raise other taxes, or continually cut services.

Repealing the food tax would provide an immediate stimulus for New Mexico’s economy because so many New Mexico families live paycheck to paycheck and would spend their tax savings right away.

A food tax repeal would also help New Mexico’s economy because it would stop the weekly exodus of New Mexico shoppers from our rural border communities to grocery stores in Texas, Arizona and Colorado, which don’t tax food.

For example, Interstate 10 is clogged on weekends with consumers from Las Cruces departing for El Paso to purchase their groceries. While they are in Texas, they shop at other stores in the mall, eat at a restaurant, see a movie and then return to Las Cruces with their wallets empty. Unfortunately, this pattern is repeated around New Mexico’s perimeter.

The food tax is also an anti-family tax. Because larger families need to spend more money on groceries, they spend a greater portion of their income on the food tax. Hispanic and Native American families are disproportionately punished because they tend to be larger than other families, according to U.S. Census data.

It is time to finally abolish New Mexico’s antiquated and anti-family tax on food and to modernize New Mexico’s tax code. As Governor Bill Richardson said in his state of the state speech earlier this year, “the tax on the food that goes on the plates of New Mexico’s families is an unconscionable reach into the pockets of New Mexico’s breadwinners.”