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Tuesday, March 02, 2010

(Updated) NM Senate Dems Succeed in Making Tax Deal More Progressive, But Problems Remain Before Vote

Update: Committee Substitute for SB 10, SB 12, SB 13, the Omnibus Tax Bill, passed last night by a margin of 25-15. The only Democrat to vote no was Sen. Cisco McSorley (D-Albuquerque). Sen. Stephen Fischmann (D-Mesilla Park) was excused, as was Sen. Steven Neville (R-Aztec).
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Debate is supposed to be starting soon (at least in legislative time) in the New Mexico Senate on Senate Finance Committee substitute for SB 10 (low-income tax rebate), SB 12 (food tax) and SB 13 (tax on federal refund for itemizers), the Omnibus Tax Bill. "Omnibus" -- yes, that means it's one bill and only one bill. In other words, the Senate leadership, working through the Senate Finance Committee, set the trap on this one. There'll be no voting on the three individual pieces of the tax puzzle -- it's all or nothing. (You can follow the action on NMI's live blog.)

That's a tried and true way to muster support from those who may dislike one or two taxes included in the bill, but who may be enticed or pressured to vote for the package because it's better than the original proposal. This is especially true if, when nothing passes, that's all she wrote. This is the same trick being used with the health care reform bill in the Congress. All the negotiations go on before the bill is put into final form and then it's just an up or down vote, period. Win or lose. In this case, if the bill fails, everyone goes home only to have another special session called at the pleasure of the Governor.

What's in the tax deal now (at least as it stands now)?

  • The general gross receipts tax was decreased from a quarter of a cent in the original deal to an eighth of a cent, cutting that in half so the hit on the poor, working class and middle class isn't quite as bad.

  • The so-called corporate compensation measure that taxes businesses if they do most of their net sales in New Mexico, which is expected to bring in about $11 million this year and about $50 million next year. This will have little impact on ordinary New Mexicans

  • An increase in the low-income tax rebate with the rebate kicking in at $25,000 a year and below in earnings for an individual. I understand this is better than what was in the original deal. It amounts to about $5 million.

  • The so-called PID add back, which would require those who itemize their tax deductions on the federal form to pay state taxes on their federal tax refunds. This would fall on those in higher tax brackets because they are the ones who itemize, so it's considered to be a fairly progressive tax.

  • The re-application of the food tax, but with municipalities giving up their compensating funds from the state. Instead, the state would essentially tax food directly at the local GRT rate, not the state rate. The municipality could repeal it. (I think that's correct but it's confusing.) Yes, the food tax is still there. Like it's set in stone. Clearly, the powers that be wouldn't budge on this one, even though there was reportedly plenty of criticism about its inclusion. However, it's better than taxing food at the state GRT rate of about 7%. In Albuquerque, for example, I understand that food items would be taxed at 1.86%, although the rates in other cities would vary according to local ordinances, and cities will look like the bad guys. Still, it's better than the original idea to apply the entire state GRT on food.

  • A 75 cent per pack cigarette tax, with 25 cents of that going directly to education. The original deal had no earmark for education. This provision isn't part of the Omnibus bill, but I understand it's part of the deal. I can't abide "sin" taxes, personally, but legislators love them, especially for cigs. There's only a minority to complain and they can cloak it in the myth that they're just doing for poor suckers what the poor suckers can't do for themselves. It's good for you!

The strategy being employed by Senate leaders and the Governor naturally puts progressive Senators between a rock and a hard place. Do they vote for a bill that, thanks to their negotiating work, now consists of about half progressive taxes and half regressive ones -- and hope the House can improve it even further -- or do they vote no and stop all the progress in the special session and go home?

Another complication is that the package can lose only five Dem votes and still pass. If it loses one more than that, Lt. Governor Diane Denish would have to break the tie. Depending on how you look at it, this would either give gubernatorial candidate Denish a chance to vote no -- thus underlining her differences with the current administration -- or put her in a position that's considered a no-win situation either way. Talk about being in the hot seat.

Strategic voting also extends to how the alphabetical roll call plays out. As Senators vote yes or no earlier in the process, those who come later in the roll call will be counting to see if their votes are needed for a win -- or if they can get away with voting no without upsetting the apple cart.

It seems apparent to me that our real Dem Senators fought for improvements in the package conceived by the conserva-Dems and the Governor -- and got some. I still think the package stinks, and that if real Dems were in control of the process it would be much better. But they aren't. Given the narrow parameters of Gov. Richardson's proclamation -- which precludes most of the progressive taxes real Democrats want -- this thing was gonna be ugly regardless. The decision each lawmaker will have to make is whether the package is so ugly it's better to go home, come back and start all over again, or whether it's been improved enough to make a compromise worthwhile. No doubt, opinions will vary.

Bottom Line: If this thing passes the Senate, it will be up to the House Dems to do their part to improve it even more. For instance, one would hope they could get the food tax replaced by an income tax surcharge on high earners, a measure that previously passed the House. Then it would be back in the Senate's court for concurrence.

The question is -- are real Dems in the House ready, willing and able to carry on the battle against the worst elements of the tax bill and not just give in to the leadership? I think we need to encourage them to fight, fight, fight. Click for contact info.

March 2, 2010 at 08:09 PM in Economy, Populism, Food and Drink, Gov. Bill Richardson, NM Legislature Special Session 2010, Taxes | Permalink

Comments

Now is the time for us to be looking at potential candidates, or recruiting some, to run against the DINOs we have, especially in the Senate.

At a national level, there is some of this going on, and financing campaigns through on-line fund raising helps to level the playing field.

This is a statewide opportunity. Let's get it going.

Posted by: bg | Mar 3, 2010 8:26:49 AM

The first one we should primary is Sen. Bernadette Sanchez. She shouldn't be anywhere near the Senate given her stupidity, inconsistency and lack of morals.

Posted by: Try This | Mar 3, 2010 8:36:15 AM