Copyright © 2022 Albuquerque Journal
SANTA FE – Roughly 850,000 New Mexicans will get rebate checks of $250 or larger in July, after Gov. Michelle Lujan Grisham signed off Tuesday on a broad tax package underpinned by a state revenue bonanza.
In addition to one-time rebates for taxpayers who made less than $75,000 last year, the tax changes approved by the governor include exempting Social Security benefits from taxation for most New Mexico retirees and trimming the state’s gross receipts tax rate for the first time in 40 years.
“Over the last three years, we’ve had more tax reform that benefits business and taxpayers than in the previous decade,” Lujan Grisham claimed during a news conference at a Santa Fe senior center.
The tax package was approved by lawmakers during the final days of this year’s 30-day legislative session, which ended Feb. 17.
In all, it will cost the state an estimated $529.7 million for the budget year that starts in July, though backers said that spending would help New Mexico families and businesses, while also boosting consumer activity.
“We are putting half a billion dollars back into the economy,” said Rep. Christine Chandler, D-Los Alamos, who helped craft the tax package as chairwoman of a key House committee.
That money is available to be returned to taxpayers – both directly as rebates and more indirectly under other tax provisions – due to state revenue levels surging to an all-time high amid rising oil production levels in southeast New Mexico.
Sen. William Sharer, R-Farmington, said he pushed for even larger tax rebates than those that were ultimately added to the tax package in the session’s final days.
Under the final version of the bill, House Bill 163, a rebate of $250 will be sent to individual taxpayers with total income of less than $75,000, while heads of households and married couples filing jointly will get $500 rebate checks if they reported earning less than $150,000.
However, Sharer said the rebates will still aid New Mexicans dealing with high gas prices and rising costs for other basic expenses.
“That was the goal – to rebate money to the people paying the taxes,” Sharer said.
About 850,000 of New Mexico’s 1.1 million taxpayers – or about 77% – will receive rebates, according to the state Taxation and Revenue Department.
‘A huge day for most retirees’
New Mexico senior citizens could also benefit from the tax changes, as the bill signed Tuesday will exempt Social Security retirement income from taxation for individual retirees who make less than $100,000 annually.
The income cut-off for married couples filing jointly will be set at $150,000 per year.
Backers pushed unsuccessfully for years to exempt Social Security benefits from taxation, pointing out New Mexico is currently just one of 12 states that levies a tax on such income.
“This is a huge day for most retirees,” said Sen. Michael Padilla, D-Albuquerque, who was one of several lawmakers who pushed for the change and said it would make New Mexico more attractive for retired individuals.
Critics of the proposal had argued that exempting Social Security benefits from taxation would primarily benefit higher-income New Mexicans, since the state’s personal income tax is only levied on income above $24,800 annually for a married couple filing jointly.
But Lujan Grisham threw her support behind the idea this year, and legislators ultimately agreed to add an income cap to address concerns.
Meanwhile, the bill signed Tuesday will also phase in a reduction of the state’s gross receipts tax rate over two years – by 0.125 percentage points in July and by the same amount in July 2023.
That will cost the state an estimated $194.1 million once the tax reduction is fully implemented.
New Mexico cities and counties impose local tax rates on top of the state’s base rate, and a proposed moratorium on local tax hikes was stripped out of the bill after local governments and some lawmakers objected to it.
The governor said Tuesday, however, that high revenue levels and a big infusion of federal pandemic relief funds should alleviate the need for local tax hikes – at least in the short term.
“I just don’t see a reason that should have to happen anywhere in the state,” Lujan Grisham said.
High-profile crime bill is still in limbo
With a bill-signing deadline looming on Wednesday, Lujan Grisham also signed eight other bills on Tuesday.
Those bills included several other tax-related measures, such as a five-year extension of a tax break for concerts and other non-athletic events held at the Pan American Center in Las Cruces.
Still awaiting final action from the governor are 13 bills, including an $8.5 billion budget for the coming year, an $827 million package of public works projects and a bill increasing pension benefits of New Mexico judges.
A high-profile crime package that enhances some criminal penalties, expands efforts to retain officers and allows for better tracking of pretrial defendants on electronic monitoring is also in limbo as the bill signing deadline nears.
As for the tax changes, the governor and several legislators indicated Tuesday more changes to the state’s tax code could be in the works for next year’s 60-day legislative session.
Specifically, those changes could include eliminating existing tax breaks and lowering base rates in an attempt to simplify the gross receipts tax structure, which has been described by critics as a “Swiss cheese” due to the many allowable tax deductions and credits.
Chandler said she plans to start laying the groundwork for the changes in the coming months, and other lawmakers signaled they’re ready to join in the thorny effort, too.
“We don’t need tax breaks as much as we need tax sanity,” Sharer told the Journal.