Copyright © 2021 Albuquerque Journal
SANTA FE – A proposal to expand and reshape two New Mexico tax breaks for low-income workers won final approval Friday as lawmakers neared the end of a 60-day legislative session.
The Senate voted 40-0 to approve the tax package after rejecting GOP-backed attempts to tack on provisions exempting Social Security benefits from taxation and partially reimposing a tax on food items.
The House then voted later Friday to send the bill to Gov. Michelle Lujan Grisham’s desk for final consideration, signing off on changes made during the Senate committee process.
Sen. Jacob Candelaria, D-Albuquerque, called the measure, House Bill 291, a “hundred-million dollar investment” in state residents.
“This is the most significant tax reform that I’ve seen the Legislature undertake that will benefit ordinary, hard-working New Mexicans,” Candelaria said.
In its initial form, the tax package also called for a new top personal income bracket of 6.5% – up from 5.9% under current state law.
But that provision, along with other proposed tax increases, was scrapped by the Senate Finance Committee earlier this week.
“It wasn’t the right time during COVID to raise taxes on people,” the committee’s chairman, Sen. George Muñoz, D-Gallup, said during the Senate debate on Friday, adding that his committee would embark on a new effort to overhaul the tax code next year.
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.
Meanwhile, the attempt by Senate Republicans to add the Social Security tax benefit exemption came after several standalone bills on the issue failed to get any traction during this year’s session.
Backers of the proposal said fully exempting Social Security benefits from the state’s personal income tax – such benefits are currently tax-exempt for single individuals up to $25,000 – would provide an economic multiplier effect for the state.
“I think it’s time we start to get a little more friendly toward those folks,” said Sen. Gregg Schmedes, R-Tijeras, referring to retirees.
But the proposed amendment was rejected on a largely party-line vote, with several Democrats pointing out the budget bill on its way to the governor’s desk would not account for the foregone revenue.
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 41,600 New Mexicans between the age of 18 to 24 to qualify. And it would expand the tax benefit to immigrant workers who are not U.S. citizens.
Lujan Grisham will have until April 9 to act on the legislation.