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Wednesday, March 03, 2010

NM Senate: Compromise Seeks Fairer Tax Mix to Balance Budget

The New Mexico Senate passed a budget measure last night to break the budget impasse, "while achieving a fairer result for all New Mexicans" according to a statement released by the Senate leadership. Senate Finance Committee Substitute for Senate Bills 10, 12, and 13, which passed the Senate 25 to 15, raises approximately $200 million through a combination of gross receipts and personal income tax impositions. Now the House will have to pass the bill. They will take it up today, after having passed their appropriations bill (HB 2) late last night on a vote of 39-27, with one absent and four excused.

Here's the post I wrote last night on the Senate tax bill. But I thought you'd like to see the Senate press release and how it describes the legislation:

The bill provides a diversified mix of taxes as it generates a stable and diverse source of revenue while avoiding deep cuts in core state programs including, education, healthcare and public safety. As passed, SFC Committee Substitute for SB 10, 12, 13:

  • reduces the Gross Receipts Tax increase proposed in Senate Bill 12 from one-fourth percent to one-eighth percent;
  • eliminates an income tax loophole that allows wealthier New Mexicans to double federal income tax deductions and thus reduce their state tax liability;
  • increases the Low Income Comprehensive Tax Rebate to help the poorest New Mexico families; and
  • requires more out-of-state businesses to pay compensating tax and helps local businesses (who pay GRT) remain competitive.

“Finding agreement was no easy task. This compromise incorporates the benefits of a broad based gross receipts tax and the more targeted progressive tax on higher incomes. I truly believe this package will do the least amount of harm to our most vulnerable New Mexicans,” said Senator Michael S. Sanchez (D-Valencia-29), Senate Majority Leader.

The Committee Substitute will save the State approximately $68 million by not having to replace revenue lost to counties and cities when food was exempt from taxation. "This bill is a way we can keep municipalities and counties from losing revenues they already count on," said Senate Pro Tempore Senator Timothy Z. Jennings (D- Chaves, Eddy, Lincoln & Otero-32).

Senator John Arthur Smith (D-Hidalgo, Luna & Sierra-35), Chair of the Senate Finance Committee added, “The measure is much less regressive than the original proposal and minimizes the damage to local budgets.”

With regard to eliminating the deduction loophole, Sen. Carlos R. Cisneros (D-Los Alamos, Rio Arriba, Santa Fe and Taos), Vice-Chair of the Senate Finance Committee, pointed out, "The tax loophole mostly benefits those earning above $100,000 a year. It just doesn't make sense. New Mexico is one of only five states that allow itemized deductions to be counted in calculating state income tax," he said.

The Committee Substitute also means that soft drinks and junk food will be equally taxed with other food items, said Senator Dede Feldman (D-Bernalillo-13), Chair of the Senate Public Affairs Committee. Her remarks were echoed by Sen. Bernadette M. Sanchez (D-Bernalillo-26), who added, “The revenue generated by the bill prevents additional cuts to education, disability, senior and many other needed services.”

Click for tables here, here and here (pdf) illustrating the changes from the original tax plan. And here's a summary (pdf) of the bill's provisions prepared by the Senate. (I don't know why that "PDF Complete" image is embedded in the pdf sent out by the Senate, but I haven't been able to remove it.)

March 3, 2010 at 10:04 AM in Economy, Populism, Food and Drink, NM Legislature Special Session 2010, Taxes | Permalink

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