Albuquerque City Council Votes Down Gross Receipts Tax Increase

ALBUQUERQUE, NM – The Albuquerque City Council on Monday night voted down a proposed increase to the city's Gross Receipts Tax (GRT), marking the second time the body has rejected a measure aimed at raising funds for municipal capital projects and general city operations.

The ordinance, which failed to secure the necessary votes, would have imposed an additional 0.4875% tax on the gross receipts of most businesses operating within the city. Its defeat provides temporary relief for local businesses concerned about rising operational costs but leaves city leaders to find other solutions for pressing budgetary needs.

The legislation, officially titled the Community Enhancement Municipal Gross Receipts Tax, was sponsored by Councilors Isaac Baca and Dan Lewis. According to its text, the revenue generated was earmarked for a combination of city-wide capital improvements and general operational purposes, which often includes employee salaries and public services.

In an effort to build consensus, Councilor Tammy Fiebelkorn introduced three amendments aimed at embedding fiscal accountability into the ordinance. Her amendments, which successfully passed, included measures to cut the proposed rate, tie operational funds directly to city employee compensation, and establish clear spending priorities. Despite these changes intended to add what she termed "guardrails," the amended bill ultimately failed to pass the final vote.

Councilor Fiebelkorn expressed disappointment following the outcome. "I fought to make this tax increase something Burqueños could trust," she said in a statement released after the meeting. "The version we amended was a responsible path forward to support our staff and ensure residents receive the services they deserve. I'll keep pushing for investments in our workforce and infrastructure, but I won't ask Albuquerque to foot the bill without guardrails in place." Her position highlights a fundamental division on the council, not just over the specifics of the tax, but on the broader principle of raising a broad-based business tax at this time.

A gross receipts tax can be particularly challenging for small and mid-sized businesses. Unlike an income tax, which is levied on profits, a GRT is applied to total revenue. This means that even a business operating at a loss or with very thin margins must still pay the tax, creating a significant cash flow burden. In our experience, this structure can disproportionately impact startups and businesses in competitive, low-margin sectors like retail and food service, which often have high revenue but low profitability.

Had the 0.4875% increase passed, it would have translated into a direct and immediate cost increase for companies. A business with $2 million in annual revenue, for example, would have faced an additional tax liability of $9,750 per year, regardless of its profitability. This cost would either be passed on to consumers, making goods and services in Albuquerque more expensive, or absorbed by the business, squeezing profit margins and potentially impacting decisions on hiring, expansion, and wages. The tax's structure also creates a cascading effect, as it can be applied at multiple stages of production and distribution, further increasing the final cost for consumers.

The debate in Albuquerque reflects a broader struggle cities across the U.S. face in balancing their budgets. While Albuquerque councilors rejected a tax hike, other municipalities are exploring different paths. In Baltimore, for example, the City Council recently gave preliminary approval to a minor 1-cent property tax cut, a move critics argued was more symbolic than substantive and failed to address the need for deeper cuts in government spending.

Other cities are exploring different, sometimes controversial, fiscal strategies. The New York City Council, for instance, proposed a plan to balance its budget not through tax hikes but by reestimating $3.5 billion in expenditures and revenues. This included projecting an additional $80 million in construction permit and late-fee revenue and finding $860 million in savings from re-calculating salaries. Such strategies often face criticism for relying on optimistic projections and accounting adjustments rather than confronting structural budget issues.

This kind of legislative uncertainty creates a difficult environment for business planning. When tax rates are subject to frequent debate and potential changes, it becomes challenging for companies to forecast future expenses, set pricing, and make long-term investment decisions. Tax stability is a cornerstone of a healthy business climate. We advise clients to build contingency plans for potential tax changes, a core part of the strategic tax preparation and compliance services offered by C&S Finance Group LLC at csfinancegroup.com. Navigating this landscape requires proactive financial management, not just reactive compliance.

With the GRT increase now off the table, the Albuquerque City Council and the mayor's office must return to the drawing board. The underlying needs for infrastructure investment and competitive city employee compensation that prompted the proposal remain. Future city budget discussions will likely involve a renewed search for alternative revenue streams or politically difficult conversations about potential spending cuts.