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Friday, February 05, 2010
House Panel Adds Tax Hike
By Dan Boyd
Journal Capitol Bureau
SANTA FE — A House committee has tacked on an additional tax increase to the state budget-balancing package being considered by the full House, which could pass it as early as today.
Members of the House postponed a vote on the budget Thursday, as Democratic leaders appeared to bow to pressure from their party's progressive wing to include the new tax hike.
House leaders had been pushing a budget for the coming fiscal year that relied on about $300 million in new revenue generated by temporarily increasing the state's gross receipts tax rate and imposing a personal income surtax on high-earning New Mexicans.
The new tax increase would eliminate an income tax deduction for individuals who itemize their tax return deductions. The $90 million it would generate would increase the amount of new tax revenue in the pending House plan to more than $400 million annually.
Backers of the bill (HB270) said the proposal would bring the state in line with a majority of other states and create an ongoing revenue stream.
"We felt like it had to be part of the package, and we did extraordinary things to make it part of the package," said Rep. Mimi Stewart, D-Albuquerque, the bill's sponsor.
Asked whether exclusion of the bill would have caused Stewart and other self-described progressive Democrats to vote against the $5.6 billion budget — potentially dooming it — she didn't discount the possibility.
"It might have," she said.
Republicans have roundly opposed using tax increases to minimize spending cuts to public schools and other governmental services and balance a budget deficit that's projected to be between $500 million and $600 million.
House Speaker Ben Lujan, D-Santa Fe, expressed cautious optimism that Thursday's developments had sewn up the support needed to pass the budget bill out of the chamber, perhaps by as soon as today.
"I think that there's a good consensus but you never know until the vote," Lujan told the Journal.
Lujan said the higher tax revenue figure could be needed to cover the uncertain status of more than $80 million in federal Medicaid funding.
Once approved, the budget and any accompanying tax increases will be sent to the Senate, which has been much more conservative in its position regarding tax increases.
The House Taxation and Revenue Committee approved the tax hike in an 8-6 vote along party lines. It would require taxpayers who itemize their deductions on tax returns to include their state and local taxes as part of their annual taxable income.
That would mean more revenue for state tax purposes.
About 200,000 taxpayers would be affected by the law and would pay an average of $271 more per tax return, according to the state's Taxation and Revenue Department.
Republicans criticized the bill as unfairly targeting a minority of the state's residents.
"What we're talking about here is a tax on a tax," said House Minority Whip Keith Gardner, R-Roswell.
However, New Mexico is one of only six states that allow state and local taxes to be listed as itemized deductions.
Richard Anklam, president and executive director of the New Mexico Tax Research Institute, said that — unlike the surtax proposal — the bill sponsored by Stewart wouldn't affect the state's base personal income tax rate.
"This proposal leaves the rate intact," Anklam told committee members. "It restores some progressivity to the tax code."
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