Copyright © 2020 Albuquerque Journal
SANTA FE – A year after conditionally approving a new tax rate for top-earning New Mexicans, legislators are considering putting the change on hold.
A bill headed to the full Senate for consideration would delay the effective date of the new top tax tier until 2026. It’s now scheduled to take effect next year.
Backers of the legislation, Senate Bill 274, said the state should not be increasing taxes while it sits on an oil-fueled budgetary windfall – there’s nearly $800 million in “new” money projected for the coming budget year.
“I just think that when we have (budget) surpluses like we have right now … I don’t think it’s good to be increasing taxes at this point,” Sen. Clemente Sanchez, D-Grants, the bill’s co-sponsor, said during a Thursday hearing of the Senate Finance Committee.
The proposal passed the committee 11-0 after little debate.
Approving the bill would have fiscal consequences, as a five-year delay of the personal income tax change would cost the state roughly $40 million in forgone revenue by the 2022 budget year, according to a fiscal analysis of the measure.
The higher income tax rate was part of a broad tax package approved by the Democratic-controlled Legislature during last year’s 60-day session, but legislators tied its implementation to future revenue levels as part of a compromise.
Top state and legislative economists said last summer that the new tax rate was indeed likely to take effect, although a final certification has not happened.
Under last year’s bill, a new top personal income tax bracket of 5.9% will be created, unless it’s delayed, for individuals making more than $210,000 a year. The higher rate will be levied only on income above that amount. The state’s top bracket is now 4.9%.
For married couples filing jointly, the same new tax bracket would apply to annual income in excess of $315,000.
Once it takes effect, the tax change will represent New Mexico’s first personal income tax increase since 2003, when former Gov. Bill Richardson, a Democrat, signed off on tax cuts that were touted as a way to boost the state’s economy.
Other provisions in last year’s tax package included the expansion of a tax break for working families, an increase in the state vehicle excise tax rate and authorization for state and local governments to start levying a tax on online sales.