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Democrats balk at quick overhaul of tax code

SANTA FE — The prospects for an immediate overhaul of New Mexico’s tax code — a top priority of Gov. Susana Martinez’s — appeared to grow even dimmer Monday as legislative leaders said they hadn’t seen a copy of the proposal yet, much less had time to study it.

The timing is critical because lawmakers will begin a special session Wednesday to craft a new spending plan for state universities and colleges, and Martinez has pushed them to reshape the tax system as a way to solidify state finances.

But House Speaker Brian Egolf, D-Santa Fe, said Monday that it simply isn’t reasonable to pass a tax overhaul this week. The final proposal is expected to run 400 pages, underscoring its complexity and the need to scrutinize the changes closely, he said.

“It’s irresponsible to try to do something like this right now,” Egolf said.

The concept itself, however, appears to have some support in the long run, perhaps with action in another special session later this year or next, lawmakers say.

Senate Majority Leader Peter Wirth, D-Santa Fe, said there’s bipartisan support for a 90-day study of New Mexico’s tax base — a move that would give lawmakers, he said, the information they need to revise the tax code without triggering unforeseen consequences.

Sen. William Sharer, R-Farmington, is proposing that idea.

The more pressing concern this week is adopting a budget for New Mexico’s institutions of higher education and legislative agencies. The fiscal year begins July 1.

Martinez, a Republican, used her line-item veto authority to remove funding for higher education and the Legislature itself from a budget bill passed by lawmakers earlier this year — a temporary move, she said, to keep the budget balanced without the need for tax increases.

The Legislature had passed a $6.1 billion spending plan that relied on a $350 million package of tax and fee increases — all of which the governor rejected.

Martinez has insisted that she won’t support standalone tax increases, but she’s left open the possibility of raising new revenue by closing loopholes in the tax code as part of a broader overhaul.

The goal, she and other supporters say, is to craft a simpler tax system that’s fair and attractive to new businesses.

Most of the discussion has focused on the tax deductions and credits that riddle New Mexico’s system of gross receipts taxes, which are levied on most goods and services, similar to a sales tax.

Rep. Jason Harper, R-Rio Rancho, has led efforts aimed at removing many of the tax breaks — with the goal of broadening the tax base and reducing the tax rate, while producing the same revenue.

But the changes could be done in phases — removing tax breaks now, lowering the rate later — to produce new revenue for next year’s budget, supporters say.

Harper said Monday that he was meeting with more than a dozen tax experts and hoped to release the bill soon.

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