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Tuesday, February 02, 2010

High-Earner Tax Clears House Panel

By Dan Boyd
Journal Capitol Bureau
       SANTA FE - A pair of tax increase proposals — one on high-earning New Mexicans and the other on most purchases made by all New Mexicans — are on their way to the House floor after being endorsed by a key House committee late Monday.
    However, even if approved by the full House, the bills could face an uphill fight in the Senate.
    Members of the House Taxation and Revenue Committee voted 10-6 Monday to enact a temporary half-cent increase in the state's gross receipts tax rate — which would generate an estimated $240 million next year — and impose a three-year surtax on single New Mexicans who earn at least $133,000 in taxable income.
    The threshold would be $100,000 per year for married individuals who file separate tax returns and $200,000 a year for married couples who file jointly.
    Proponents of the measure (HB9) said New Mexicans in the top income brackets, whose income tax rates were lowered in 2003, should help the state balance a budget deficit that's projected to be between $500 million and $600 million next year.
    "We were quite generous in this area for a time, and now we have to tighten our belts," said Rep. Edward Sandoval, D-Albuquerque, the bill's sponsor.
    Sandoval's proposal had previously set the surtax rate at 1 percent but was amended by committee members Monday via the same party-line vote and increased to 1.5 percent.
    That means a single individual making $150,000 per year in taxable income would pay about $255 in additional state taxes under the surtax.
    Republican committee members questioned whether the surtax would generate as much money as estimated by the state Taxation and Revenue Department.
    They also spoke out Monday against the structure of the proposed tax.
    "I think it's punitive, not progressive," said Rep. William Gray, R-Artesia.
    The surtax and a number of other tax hike proposals are backed by labor unions, religious organizations and social advocacy groups, who say the additional revenue could help the state avoid cutting the salaries of state workers and teachers and paring back core services.
    The bills are opposed by business groups and industry lobbyists, who say they would hurt small businesses and unfairly target a small portion of the state's population.
    Advancement of the tax proposals is seen as a pivotal development to the 30-day legislative session, which hits its midpoint on Wednesday.
    If no tax increases are approved, it's likely lawmakers will have to approve deep spending cuts to balance the budget.

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