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Saturday, February 06, 2010
House Backs $5.6B Package
By Dan Boyd
Journal Capitol Bureau
The New Mexico House approved a $5.6 billion spending package Friday, along with a pair of big-ticket tax increases to help pay for it, setting the stage for a budget showdown with the Senate.
The budget approved by a 43-25 vote for the fiscal year that starts July 1 would slightly trim state and federal spending from this year's levels but wouldn't cut salaries of educators and state workers.
It would rely on more than $300 million in revenue generated by tax hikes — one on sales and the other on higher-earning New Mexicans — and about $200 million in federal aid to balance a budget deficit that's expected to be between $500 million and $600 million.
House Republicans attempted to impose deeper across-the-board spending cuts but were thwarted by Democrats, who control a majority of the chamber's 70 seats.
"State government is not like a giant building where you can cut off one of the floors," said Rep. Gail Chasey, D-Albuquerque, who joined most Democrats in voting for the budget package. "We are talking about human beings."
Friday's vote means the budget bill and approved tax hikes now advance to the Senate, where the measures could face tough going in the more conservative chamber.
An additional tax increase that would have eliminated certain income tax deductions and brought the revenue generated by the House's tax package to about $400 million was shot down by one vote.
Gov. Bill Richardson, who's in his final year as governor, commended the House's action.
"I appreciate the balanced approach taken by the House to rely on targeted spending cuts and new revenue to deal with the deficit," Richardson said. "However, I continue to have reservations about tax increases that could hurt our efforts to create jobs."
In particular, the two-term Democratic governor is wary of a 1.5 percent personal income surtax on higher-earning New Mexicans, Richardson spokesman Gilbert Gallegos said.
The votes on all three big-ticket tax increases were tight. A fourth measure that would ratchet up income tax compliance on out-of-state residents passed by a wider margin.
House members voted 34-32 in favor of a measure to temporarily increase the state's gross receipts tax base rate from 5 percent to 5.5 percent starting in July.
The proposal (HB119) would generate an estimated $240 million for the state next year — when people would spend 50 cents more on every $100 spent on most commercial transactions — and would be gradually phased out over four years.
Opponents criticized the tax hike as shortsighted and argued in favor of trimming the ranks of state government employees.
"It's a long-range problem being fixed by a short-term solution," said House Minority Leader Tom Taylor, R-Farmington. "We're simply too large to sustain ourselves right now."
Nine Democrats broke party ranks and joined with Republicans in opposing the tax increase.
Supporters, however, said New Mexico citizens don't want to see additional spending cuts, particularly to public education.
"If we all share the burden, it's not as painful as if we only put the burden on a certain segment of our population," said House Speaker Ben Lujan, D-Santa Fe, who sponsored the bill.
Members also voted narrowly — 36-32 — to approve the personal income surtax.
The surtax, which would expire at the end of 2012, would levy an additional 1.5 percent personal income tax on any taxable income in excess of $133,000 per year for single New Mexicans.
The threshold would be $100,000 annually for married individuals filing separate returns and $200,000 per year for married couples filing jointly.
The tax (HB9) would funnel an estimated $66 million into state coffers in the upcoming year.
Republicans, who took a hard-line stance against all tax proposals, blasted what they described as a tax-first approach to balancing the budget and expressed doubt as to whether the tax hikes would be temporary.
"This temporary tax is going to be in place long after most of us are gone," said Rep. Donald Bratton, R-Hobbs.
The third tax increase proposal, which self-described progressive Democrats fought to have included as part of the budget package, was rejected 34-33.
The measure (HB270) would have raised the amount generated by tax hikes in the House budget plan to about $400 million.
Had it passed, the proposal would have eliminated an income tax deduction for individuals who itemize their tax return deductions. That would have meant about $90 million in new tax revenue for the state.
Republicans applauded when the vote was announced.
During Friday's lengthy debate, Rep. Dennis Kintigh, R-Roswell, said the tax proposal would make New Mexico's economic policies similar to those of California.
"We will continue to have problems as long as we punish success and discourage economic activity," Kintigh said.
Supporters, however, described the measure as a fairness issue and said it would bring New Mexico in line with a majority of other states.
"The issue of this being a tax on a tax is just not true," said Rep. Mimi Stewart, D-Albuquerque. "We're not retaxing anything. We're just not allowing that deduction."
New Mexico lawmakers have already cut state spending by about $700 million in the last two years, though spending increased by more than $2 billion in the six previous years.
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