It seems as if everywhere you go in New Mexico these days, businesses have “help wanted” signs, or reduced hours and services, or both.
Many New Mexicans had hoped lawmakers would offer meaningful business tax relief during the 60-day session underway, given that the state is flush with $3.6 billion in “excess revenues,” primarily from oil and gas proceeds.
But the omnibus tax package that emerged Monday will only make it harder for businesses to stay open in New Mexico, and the state’s greedy largest cities and the New Mexico Municipal League are at the core of the problem.
The proposed tax package isn’t all bad — it expands the state’s child tax credit to up to $600 per child, includes $300 rebates to residents, extends the sunset date on the military retirement pay tax exemption to 2031, adopts a “single sales” factor apportionment for corporate taxes that could incentivize multi-state companies to expand and hire more people in New Mexico, and modestly reduces the state’s gross receipts tax base rate by 0.625%. Those are all good things.
But the cobbled-together House Bill 547 also overhauls the personal income tax code so that many small-business owners who file that way will actually pay higher taxes by creating two new tax brackets, including a new top bracket of 6.9% — up from the current 5.9%. And it punishes personal savings, investment and wealth creation by increasing taxes on capital gains. Bill sponsor Rep. Derrick Lente, D-Sandia Pueblo, claims doctors, nurses, engineers and other higher-wage earners can afford the tax increases. Watch them join the exodus and move to another state.
Still, the biggest issue is what the bill does not do. Democrats caved to the Municipal League and its executive director, AJ Forte, by omitting a much-needed proposed tax exemption for accountants, architects and other professional services that would address “tax pyramiding,” when taxes are levied several times on the same goods or services. The provision would have provided significant relief to small businesses. Several lawmakers have worked on this issue for years, and it had bipartisan support and the governor’s blessing in this session.
But it was opposed vigorously by such large cities as Albuquerque and Santa Fe that don’t want to see any reductions in their revenue streams whatsoever, even if it would help build their economies by aiding small businesses in their communities. And they still rejected it even after a legislative compromise that would have made the cities better than whole.
It’s beyond disappointing that the House has not only ignored the well-vetted proposal from Democratic Gov. Michelle Lujan Grisham and Rep. Jason Harper, R-Rio Rancho, (HB 367) to lower the GRT and address pyramiding, but also is instead proposing tax increases as lawmakers consider another record-setting $9.4 billion budget.
Lawmakers still have an unprecedented opportunity to offer substantial tax relief for small businesses and the middle class, and to nurture our private sector. Yet, too many are focused on a more “progressive” tax code that punishes small businesses and skilled professionals, and places New Mexico in the Top 15 highest-tax-rate states in the nation, putting us at further competitive disadvantage with such neighboring states as Texas, which has no state income tax. Who do they think is going to come/stay and create jobs/provide services?
Tack the HB 547 monstrosity on top of Senate Bill 11, a Paid Family and Medical Leave Act that would crush many of the state’s 155,000 small businesses by requiring them to contribute money to a new state fund, while absorbing annual 12-week staff vacancies, and the answer is nobody.
The misguided tax package is expected to advance quickly to the House floor after passing the House Taxation and Revenue Committee Monday on a 9-5 party-line vote. It and SB 11 are thumbs in the eyes of the hardworking, entrepreneurial middle class.
If we hope to keep many New Mexico businesses in business and professionals working here, we need the few lawmakers who understand a business’s challenges and who believe in encouraging job creation to kill SB 11 and rewrite the ill-advised HB 547. We need our governor, who said Feb. 10 that her work with Harper would “make New Mexico businesses even more competitive, continuing this administration’s commitment to making our state the very best place to do business,” to use her powerful and persuasive voice. If lawmakers aren’t swayed, she should use her veto pen.
This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.
