Copyright © 2021 Albuquerque Journal
SANTA FE – A key Senate committee removed tax hikes on New Mexico corporations and higher-income residents from a House-approved tax package on Thursday, delivering a victory to business groups that had railed against the proposed tax changes.
After stripping the tax increases from the measure, House Bill 291, the Senate Finance Committee then voted 7-4 to advance the scaled-back bill that would still expand two tax breaks for low-income New Mexico workers to the Senate floor.
Without the tax increases, the more generous tax credits would cost the state an estimated $70 million annually. But a $7.4 billion budget bill nearing final approval at the Roundhouse accounts for the price tag – at least for the coming budget year.
“It’s not everything we wanted … but at least we’re helping people who need it around the state,” said Sen. George Muñoz, D-Gallup, the committee’s chairman, during Thursday’s hearing.
He also said the timing was not right for tax increases, with many businesses still struggling due to the COVID-19 pandemic.
The committee hearing was a contentious one, with a business owner at one point being inadvertently heard on the online webcast using a curse word, apparently in reference to legislators, and accusing them of “trying to throw taxes at us.”
That prompted criticism from Muñoz, who said the individual would be barred from participating in future committee meetings.
In addition, Sen. Jacob Candelaria, D-Albuquerque, said the hot mic comment showed as “clear as day” the attitudes of many business groups.
“I don’t believe in rapacious, exploitative capitalism and I think we should be investing in people,” Candelaria said.
Backers of the original bill argued it would make New Mexico’s tax code more progressive, while also diversifying the state’s revenue base. Money from taxes and royalties on oil and natural gas industries, a historically volatile revenue source, currently make up more than 40% of total state revenues.
But critics said the higher rates could be harmful for businesses and lead to job losses around New Mexico.
“Raising taxes – especially when the state is flush with cash – may grow government coffers, but it’s not the way to grow our economy,” Terri Cole, the CEO and president of the Greater Albuquerque Chamber of Commerce, said after Thursday’s vote.
The provisions stripped from the tax package included provisions increasing the corporate income tax over several years and implementing new top personal income tax brackets, with a new top bracket of 6.5% – up from 5.9% under the state’s current tax code.
Top Senate Democrats had previously argued for a “revenue neutral” tax package, saying an expected influx of federal stimulus dollars and a projected $2.7 billion in cash reserves provided the state with the opportunity to make sweeping changes to its tax code.
Meanwhile, the provisions still left in the bill would expand the tax benefits offered by the Low Income Comprehensive Tax Rebate and the Working Families Tax Credit.
The tax credit would also be expanded to allow an estimated 41,6000 New Mexicans between the age of 18 to 24 to qualify. And it would expand the tax benefit to those working legally who are not U.S. citizens.â€‹
If approved by the full Senate, the tax package would have to return to the House due to the amendments.
Both chambers would have to sign off on the same version of the bill before the 60-day legislative session ends Saturday in order to send it to Gov. Michelle Lujan Grisham for final approval.