SANTA FE – State lawmakers are racing to approve a temporary change in the state’s personal income tax code aimed at lessening the impact for some New Mexicans who could face a financial hit from the federal government’s new tax law.
A bill approved 66-0 by the House would keep in place a current state tax deduction for heads of household – usually single parents with dependent children – for one year.
“We need to make sure those dollars stay in their hands,” Rep. Carl Trujillo, D-Santa Fe, said during a House floor debate this week.
While the federal tax law signed into law by President Donald Trump lowers corporate and income tax rates, it also increases the standard deduction and removes the ability to deduct some state income taxes.
In New Mexico, that will actually mean a higher tax bill for some individuals.
Overall, the state will take in an additional $51.8 million per year in state personal income tax revenue due to the federal tax changes, according to a state Taxation and Revenue Department analysis.
But keeping the head of household exemption in place for another year would reduce that total amount by $6.2 million, lawmakers say.
Rep. Jason Harper, R-Rio Rancho, who has pushed unsuccessfully for sweeping changes to New Mexico’s tax code in recent legislative sessions, said the federal tax law essentially broadens the tax base by doing away with certain tax deductions.
“The feds did what we’ve been trying to do with our gross receipts tax,” Harper said during a House floor debate this week.
However, he said he supports the legislation pending at the Roundhouse, House Bill 367, to minimize the impact on some taxpayers while lawmakers further study the federal law.
Other states are also considering changes in response to the federal law, officially called the Tax Cuts and Jobs Act of 2017.
New Mexico is one of seven states the Tax Foundation identified in a recent report as likely to receive increased revenue under the federal tax bill. That’s because those states conform with federal guidelines when it comes to personal income tax, and the elimination of exemptions is expected to outweigh the increase in the standard deduction.
To be enacted into law, the New Mexico bill would still have to be approved by the Senate before the 30-day session ends at noon today. It would also have to be signed by Gov. Susana Martinez.