» Approved tax package includes cuts, tighter loopholes

Approved tax package includes cuts, tighter loopholes

The tax package approved Saturday by both the House and Senate includes six provisions, some of which would cut tax rates.

It includes an expansion of the state’s film tax credit for qualifying TV series, which was vetoed by Gov. Susana Martinez on Friday but revived as part of the broader package.

Overall, backers of the massive plan say it represents good overall tax policy: A decrease in the broad-based taxes paid by businesses will be largely offset by tightening several existing tax breaks, or “loopholes.”

The bill passed the Senate 34-8 and was endorsed in the House 46-18. The pieces of the tax package are as follows:

Trim corporate income tax: Would gradually reduce the state’s top-end business tax rate from 7.6 percent to 5.9 percent over a five-year period. That would make the state’s rate lower than at least one of its neighbors: Oklahoma’s rate is 6 percent. The governor had proposed a 4.9 percent rate.

Tighten existing tax breaks: Would tighten the requirements for businesses to qualify for a high-wage jobs tax credit, while also extending the credit, and would repeal certain tax deductions given to manufacturers. Both these tax breaks have ended up being more expensive to the state than originally projected in terms of foregone tax revenue.

“Breaking Bad” bill: Would expand the state’s film tax credit for qualifying television shows by allowing them to receive a larger rebate from the state. An annual film incentive limit of $50 million would remain intact, but up to $10 million per year in money unused under that cap could be carried forward for use in future budget years.

Eliminate “hold harmless” distributions to cities and counties: Starting in two years, a 15-year phaseout would be enacted of the “hold harmless” payments the state makes to cities and counties. Local governments would be allowed to raise their local option taxes to offset the lost money, but could not levy a tax on food or medical services. Alternatively, they could also trim their spending to compensate for the lost tax money.

Allow single sales factor: Would allow manufacturers to base their income taxes entirely on their New Mexico sales. Unlike previous versions of the tax package, it would not require that companies meet a dollar threshold to qualify. Would be phased in over five years.

Combined reporting: Would mandate that large retailers doing business in New Mexico but based in another state combine their earnings from all subsidiaries for tax purposes. Companies would then pay corporate income taxes to New Mexico based on a portion of those earnings. This could increase the state’s tax revenue. However, big-box retailers would be exempted from the requirement if they also have a nonretail operation in the state that employs at least 750 people.

- Dan Boyd