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Martinez renews call for broad tax reform

SANTA FE, N.M. — With the start of a special session just two weeks away, Gov. Susana Martinez renewed her call for a comprehensive restructuring of New Mexico’s tax code – setting up a confrontation with the Democratic majority in the Legislature.

And the Republican governor said Wednesday that she is willing to at least consider reimposing the gross receipts tax on food, if it’s part of broader changes that reduce the overall tax rate and simplify the tax system.

Reshaping the tax code, Martinez said, is a key component of resolving the state’s budget crisis.

“I would not support increasing the taxes on food if it’s a standalone piece,” Martinez told reporters after a speech to about 190 business leaders at an Economic Forum meeting at the Hotel Albuquerque. “It has to be something that is going to be considered in a very broad tax reform that broadens that base and lowers the gross receipts tax for all the consumers.”

Top Democratic lawmakers, however, have described a reimposition of the food tax – abolished in 2004 – as a nonstarter.

In an interview earlier this week, Sen. Clemente Sanchez, D-Grants, said there was broad opposition among Senate Democrats and Republicans alike to the tax reform bill favored by Martinez in the legislative session earlier this year.

“There are just a whole lot of problems with it that need to be vetted,” Sanchez said. “We need to make sure we’re not doing more damage than good.”

Martinez and the Legislature – where Democrats hold majorities in both chambers – have been at odds for months over how to balance New Mexico’s budget for the fiscal year that begins in July. A downturn in oil and natural gas prices has squeezed a critical source of state revenue.

State lawmakers this year passed a $6.1 billion spending plan and a companion bill authorizing $350 million in tax increases to help cover the spending and boost reserves. It was necessary, they said, to avoid damaging cuts to public schools and basic state services.

Martinez vetoed the tax package and removed funding in the budget for higher education and the Legislature itself – moves she described as temporary to keep the budget balanced without higher taxes. She has called lawmakers back to Santa Fe for a special session that will begin May 24 to address the budgets for those institutions.

She also has put an overhaul of New Mexico’s tax code on the agenda.

Legislative leaders, meanwhile, are suing Martinez. They have asked the state Supreme Court to restore the funding they passed for public colleges and universities and for legislative agencies.

Arguments in the case are set for Monday.

Martinez has suggested she’d be open to raising some new revenue for next year’s budget if it’s linked to a comprehensive reshaping of the tax system. She supports a proposal to remove credits, deductions and exemptions from the gross receipts tax code – a move that would broaden the tax base and allow for the overall tax rate to be lowered, supporters say.

The proposal would actually benefit low-income residents, supporters say, because it would exempt food purchases made by people who qualify for food stamps, or the Supplemental Nutrition Assistance Program, and would eventually lower the overall gross receipts taxes on other items.

Opponents say that’s not enough – that some people who qualify for SNAP benefits don’t actually get them and that the program doesn’t cover all food purchases.

Journal Capitol Bureau Chief Dan Boyd contributed to this article.