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Senate panel weighs scaled-back tax package

SANTA FE – A House-approved tax package aimed at generating a more stable revenue stream for New Mexico could be significantly downsized under proposed Senate changes.

The Democratic chairman of the Senate Corporations and Transportation Committee rolled out the changes Tuesday – including one that would spike a provision to effectively undo a personal income tax cut signed into law by then-Gov. Bill Richardson in 2003.

“With the revenue that we have, it’s very difficult to raise income taxes,” said Sen. Clemente Sanchez of Grants, the committee’s chairman.

But the panel ultimately held off on voting on the proposed changes – or the bill itself – on Tuesday to give the bill’s sponsors and critics more time to negotiate a possible compromise.

In its current form, House Bill 4 would increase some tax rates – on cigarettes, motor vehicle purchases and higher-earning New Mexicans – while also broadening tax breaks for families.

It would also allow the state and local governments to start levying a tax on online sales – a 2018 U.S. Supreme Court ruling allowed states to do so – and would require nonprofit hospitals to pay the same gross receipts tax rate that other hospitals do.

Backers of the legislation opposed some of the proposed changes to the bill, saying they would undermine what they’re trying to accomplish by reducing the amount of money expected to be generated.

“Don’t you think there should be some progressivity there?” Rep. Jim Trujillo, D-Santa Fe, asked Sanchez at one point, referring to the proposed changes to personal income tax rates.

Two Cabinet secretaries in Gov. Michelle Lujan Grisham’s administration also suggested the first-term Democratic governor would oppose the amendments, specifically citing a pared-back increase of a state tax credit for working families.

In all, the proposed Senate changes to the tax bill would reduce how much projected revenue it would generate for the state – from about $356 million to roughly $93 million. But economists cautioned that projection could be altered after further study.

New Mexico has an unprecedented budget surplus of more than $1.2 billion, with most of it coming from an oil drilling boom in southeastern New Mexico. Both oil and natural gas are historically volatile revenue sources.

Republican lawmakers have described the tax package as unnecessary at a time when the state is sitting on such a budget surplus.

“We should be the richest state in the union – we just need to get out of our own way,” said Sen. William Sharer, R-Farmington.

But Democratic supporters say it’s important to diversify the state’s revenue base to fund proposed spending increases in public schools and other programs.

“For the past 15 years, we have starved basic government functions like education,” said Rep. Javier Martinez, an Albuquerque Democrat.

The 60-day legislative session ends at noon Saturday.

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