Copyright © 2021 Albuquerque Journal
SANTA FE – The state House endorsed a broad tax package late Wednesday that would expand tax credits for low-income workers but establish higher tax brackets for top earners.
The legislation would cost New Mexico about $73 million in annual revenue by making it easier to qualify for the Low Income Comprehensive Tax Rebate and the Working Families Tax Credit, in addition to making them more generous, according to state economists.
But it would raise about $78 million by creating new, higher income tax brackets – topping out at 6.5% – and narrowing a capital gains tax deduction. The top tax rate of 6.5% would apply to income over $415,000 a year by an individual.
Rep. Javier Martínez, an Albuquerque Democrat and co-sponsor of the bill, described the tax increases as modest but necessary to pay for the tax cuts. The net effect, he said, would be to deliver tax relief to families who need it.
Rep. Christine Chandler, D-Los Alamos, also described the measure as a step toward more equitable taxation.
“It strikes a great balance between supporting working people, lower-income people and just imposing a little bit extra on those who can afford it,” said Chandler, also a co-sponsor of the bill.
Republican legislators, in turn, said it isn’t the right time to raise taxes. State revenue is already healthy without tax hikes, opponents said, and families reeling from the COVID-19 pandemic shouldn’t be hit with increased taxes, no matter their income.
“Our families are hurting,” Rep. Larry Scott, R-Hobbs, said. “We really need to think twice about increasing taxes.”
Opponents also say the new tax brackets would hit doctors and small businesses at the same time New Mexico is trying to recruit physicians and boost the economy.
“I’m worried we’re not being as data-driven as we could be,” said Rep. Jason Harper, R-Rio Rancho.
The proposal, House Bill 291, will head next to the Senate in the final weeks of the session. Democrats hold majorities in both chambers, though they sometimes disagree on tax and spending priorities.
The legislation won House approval 42-27 after a three-hour debate.
Two Democrats – Reps. Willie Madrid of Chaparral and Candie Sweetser of Deming – crossed party lines and voted against the bill. All Republicans and one independent also opposed it.
In addition to changes to income taxes, the proposal would allow the assessments used in property tax calculations to climb up to 10% a year – rather than the usual 3% limit – for homes that aren’t the owner’s principal residence, beginning in 2024.