SANTA FE – A bill backed by Gov. Susana Martinez to cut the state’s corporate income tax rate to 4.9 percent from 7.6 percent was tabled in a House committee Wednesday after Democratic members expressed concern about potential loss of state revenue.
In addition to cutting corporate income tax rates, House Bill 182 would reduce the taxes paid by companies manufacturing products in New Mexico that are sold out of state.
Taxation a nd Revenue Committee Chairman Edward Sandoval, D-Albuquerque, said the bill would be tabled until the committee has a chance to review other legislative proposals regarding corporate taxes, incentives or credits. Members need to evaluate the best options to help spark job growth, he said.
The tabling of legislation in Taxation and Revenue while other bills are being reviewed is a common practice for the committee.
“We have to be careful when we do these things,” Sandoval said. “We can’t just vote for something that sounds good, not knowing what the total consequences might be.”
The Republican governor is advocating the corporate tax cut, saying lowered rates are necessary to attract businesses to relocate to New Mexico rather than neighboring states, such as Arizona, which has reduced its corporate tax rate to 4.9 percent.
Staff analysis says the bill would reduce revenues from the state corporate income tax by about $50 million in 2014. After a three-year phase-in, the lost revenue would balloon to an estimated $255 million, the analysis said.
“We’re going to do some more study on it,” said Rep. James Strickler, R-Farmington, the sponsor of the bill. “Arizona has recently done the same thing. We need to get some more numbers. The committee asked some good questions. We need to see what upside we have, because the whole point is, yes, we lose these taxes, but we’re going to make up for it with job creation.”
But Democratic members of the Taxation and Revenue Committee expressed concerns about whether the high cost of a corporate tax cut might mean future budget troubles for state government.
“I think we need to be as business friendly as possible, but on the other hand, we can’t give away the farm,” Sandoval said. “The bottom line is we have to pay the bills, we have to balance the budget.”
Governor’s spokesman Enrique Knell said Martinez remains optimistic there’s common ground between legislative Democrats and Republicans on changes to the tax code that would make New Mexico more economically competitive.
“The governor has had productive discussions with legislators on both sides of the aisle about the need to reform our tax code to make N.M. more competitive for jobs,” Knell said. “She’s optimistic that there’s common ground.”
— This article appeared on page A6 of the Albuquerque Journal