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Debate heats up over impact of NM tax law changes

Copyright © 2019 Albuquerque Journal

SANTA FE – A sweeping tax package passed during this year’s legislative session will mean an income tax cut for 70% of New Mexico taxpayers with children and 29% of all those filing taxes, according to a new analysis conducted for a group that supported the tax legislation.

For a family making between $54,000 and $94,000 annually, the tax changes will lead to an average tax savings of $268 a year, according to the analysis by the Institute on Taxation and Economic Policy, a nonpartisan Washington, D.C.-based research organization.

However, the analysis does not factor in several other provisions in the tax package – including higher taxes on cigarettes and an increase in the state vehicle excise tax rate – and critics say the bill will actually cause most New Mexicans to pay more in taxes.

“Every scenario that we looked at, the amount of taxes paid went up,” said Rep. Jason Harper, R-Rio Rancho, who said the tax package could particularly hurt small businesses and certain medical professionals.

Supporters of the tax legislation say it will make the state’s personal income tax system more progressive by expanding a tax break for working families and creating a new tax deduction for New Mexicans with multiple children that is intended to offset the state-level impact of a 2017 federal tax law signed by President Donald Trump.

The expansion of the working families tax credit will benefit an estimated 216,000 New Mexico taxpayers and provide a total of $38 million in tax savings, according to the analysis.

“Our state lawmakers made great strides in putting working families first this year – especially families with children,” said James Jimenez, executive director of New Mexico Voices for Children, a nonprofit group that supported the tax package and commissioned the report. “These tax changes will really help our working families as well as help make our tax code fairer and more stable.”

Sharon Kayne, communications director for New Mexico Voices for Children, said Thursday that the analysis focused only on the tax package’s income tax provisions because they are more easily analyzed using federal Internal Revenue Service data.

The report did include a new tax rate for top-earning New Mexicans – it would apply to annual income in excess of $315,000 for married couples filing jointly – that was also included in the tax package and appears likely to hit the state’s books in 2021.

But tax provisions that were not studied in the report include higher taxes on cigarettes, a new tax on vaping products, a requirement that nonprofit hospitals pay the same gross receipts tax rate as other hospitals and authorization for state and local governments to begin levying a tax on online sales.

The tax package was signed into law by Gov. Michelle Lujan Grisham in April. The personal income tax breaks included in the bill took effect this year, for tax purposes, and other provisions will not take effect until next year – or later.

The entire bill is expected to generate at least $71 million in additional revenue for the state in the current budget year, according to a legislative bill analysis.

That number is even larger when additional revenue for local governments and road projects in southeastern New Mexico are factored in.

Although some Republican lawmakers have blasted the bill as unnecessary at a time the state sits on an estimated $2.3 billion budget surplus, backers say it will create more stable revenue streams.

“The best time to fix your roof isn’t when it’s raining – it’s when the sun is shining,” Lujan Grisham told a news conference just after lawmakers adjourned in March.

The tax analysis is scheduled to be presented to a legislative interim committee next week in Santa Fe.

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