SANTA FE – A rapidly evolving tax package that would expand two tax breaks for low-income workers in New Mexico while increasing tax rates for wealthier citizens and some businesses that were one step closer to final approval on Saturday.
The Senate Tax, Business, and Transportation Committee voted 7-4 in favor of advancing the House-approved bill, House Bill 291, after making several amendments.
The changes include the expiry of the corporate tax cuts legally signed by the then government for 2013. Susana Martinez and revision of the income thresholds for new proposed income tax brackets.
However, Senate Majority Leader Peter Wirth, D-Santa Fe, withdrew several previously proposed changes, including an increase in tobacco tax rates in New Mexico and a slight decrease in the state’s gross income tax rate.
Wirth said an expected federal incentive dollar inflow and projected cash reserves of $ 2.7 billion will give the state a “cushion” to make sweeping changes to its tax laws.
“The time for this discussion is now,” said Wirth on Saturday.
He also said the legislation in its current form could cost the state around $ 60 million in the coming fiscal year, but would generate additional revenue in the years to come.
Some senators questioned the timing of the tax package given the state’s revenue prospects. However, Senator Bill Tallman, D-Albuquerque, asked, “Why are we trying (to collect taxes) when we’re so flush with revenue? ”
But Tallman eventually voted with the committee’s other six Democrats to send the bill to the Senate Finance Committee while the panel’s GOP members voted in opposition.
The original tax measure would expand two different tax credits for low-income workers in New Mexico while also establishing a higher tax rate for highest-income citizens.
These provisions would remain in the bill under the proposed changes, as would a new state income tax bracket of 6.2%. This rate would apply to annual income greater than $ 622,000 for married couples filing together, and income greater than $ 415,000 for individuals.
New Mexico’s highest income tax bracket is currently 5.9% under the 2019 law, but it was 8.2% before a 2003 tax cut by the then government. Bill Richardson came into effect.
Bill supporters say this will make New Mexico’s tax laws more progressive while diversifying the state’s revenue base. Tax and royalty money for the oil and natural gas industry, a historically volatile source of income, currently accounts for more than 40% of total government revenue.
However, critics of the tax package say the higher tax rates could be detrimental to businesses already struggling with the COVID-19 pandemic.
“This is an instant success for many small businesses,” said Senator Ron Griggs, R-Alamogordo.
In addition to the income tax changes, the bill would make it easier to qualify for both the comprehensive low-income tax break and the working family tax credit currently available to those earning less than $ 15 an hour.
The changes would allow New Mexicans ages 18 to 24 and those who work legally and who are not US citizens to qualify for the tax break.
The tax package will now be passed on to the final assigned committee, the Senate Finance Committee, with one week remaining in the 60-day legislative term.