SANTA FE – New Mexico’s tax rates on tobacco products and corporate income would rise while the state’s gross income tax rate would be lowered to an already far-reaching tax package due to sweeping changes proposed Thursday by a senior Senate Democrat.
The changes, if finally approved, would represent the latest round of changes to state tax law that lawmakers have long complained about. They are complicated and confusing.
Senate Majority Leader Peter Wirth, D-Santa Fe, who proposed the changes to a House-approved tax measure, said the changes should be revenue-neutral – or increase revenue for the state.
“The idea here is not to make any additional tax cuts without being able to pay for them,” said Wirth during a meeting of the Senate Committee on Taxes, Economics and Transport.
However, the committee members ultimately held back to vote on the proposed changes. Several senators said they needed more time to digest their financial repercussions.
“I’m a bit confused and I think we need this information before we release this bill,” said Sen. Gay Kernan, R-Hobbs.
She also said the legislation would not replace the oil and gas revenue collected by the state, saying instead that lawmakers would “just shift the burden” of taxes.
The original tax measure, House Bill 291, would expand two distinct 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, although some income thresholds would be changed under the new tax rates.
For example, annual income greater than $ 311,000 would be taxable for New Mexicans with a new 6.5% income tax rate filed individually, compared to a proposed limit of $ 415,000 for the proposed new maximum rate under the House-approved bill.
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. Taxes and royalties paid by the oil and natural gas industry, a historically volatile source of income, currently account for more than 40% of total government revenue.
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.
And several workers who testified in Spanish during the committee Thursday and heard the changes would help them pay bills and other basic expenses.
However, critics said increasing the income tax rate for top earners and capping a tax break on investment income, especially investment income, would hurt many New Mexicans.
“The state shouldn’t levy taxes on families and small businesses, especially during a pandemic,” said Terri Cole, president and CEO of the Greater Albuquerque Chamber of Commerce.
In the meantime, the proposed amendments to the roundhouse tax law would remove a provision that deals with homeowners’ property tax bills.
In its current form, the house bill would more than triple an annual property tax assessment limit – from 3% to 10% – for residential properties that are not their owner’s primary residence.
However, Wirth said that provisions aimed at second home owners in the Santa Fe area who benefited from a 2000 law limiting annual property tax increases for homeowners should be discussed in a stand-alone piece of legislation.
He also said the changes were proposed on Thursday to avoid a conference committee where House and Senate officials are trying to work out a compromise on legislation in the final hours of this year’s session, like they were in 2019 .
This could still happen, however, as the tax bill would still have to be approved by a second Senate committee and the entire Senate if it were approved by the Tax Committee on Saturday.
It would then be for the House to vote before the end of the sitting on March 20 whether the amendments should be approved.