SANTA FE — With the clock ticking toward adjournment of their 60-day session, New Mexico lawmakers pushed toward final approval a hard-fought deal on a massive tax package that would provide $500 rebates to taxpayers and a phased-in reduction to the tax consumers pay on most goods and services.
After a group of six legislators — three House members and three senators — held several open negotiating sessions over the course of Friday, they agreed late in the day on changes to the state’s film incentive program and a pared-back alcohol tax hike that had emerged as key sticking points.
With the deal in place, the Senate then voted 33-9 shortly after midnight to sign off on the final version. A similar House vote was expected Saturday morning, with the session set to end at noon.
Senate Minority Leader Craig Brandt, R-Rio Rancho, lauded Gov. Michelle Lujan Grisham for her role in helping broker a deal on the tax package, which he said would provide a yearly tax cut of about $1 billion once its fully phased in by 2027.
“Things happen up here; you change your mind sometimes,” Brandt said during the late-night floor debate. “A lot of the things that I asked for I got, so I appreciate that.”
Other legislators said they didn’t agree with all parts of the tax package, but said its good provisions outweighed the bad.
“Each of us have our own opinions, but it’s time to compromise and get this done,” Senate Majority Leader Peter Wirth, D-Santa Fe, said during one of the conference committee meetings held to craft a compromise on the bill.
The tax package, House Bill 547, includes more than 20 provisions — ranging from a tax break for teachers’ purchases of school supplies to an expanded child tax credit — and represents lawmakers’ latest attempt at providing financial relief to taxpayers amid an oil-fueled state revenue windfall.
But deciding which tax pieces to include in the package prove to be a politically challenging task.
Earlier this week, Lujan Grisham urged legislators to trim back the tax package, saying it “cuts too deep, too quickly” and could lead to future spending cuts if revenue levels decline.
In order to accomplish that, the group of six legislators appointed to hammer out a compromise agreed to phase in a 0.5 percentage point reduction in the state’s gross receipts tax over the next four years. Those tax cuts could also be automatically undone if revenue levels drop significantly.
They also agreed to scale back a 5 cent-per drink alcohol tax hike that had been proposed by the Senate.
In its place, they settled on a 20% alcohol tax increase that would impose about a one-cent per drink increase on beer, and roughly a two-cent per drink increase on spirits. Revenue generated by the tax hike would be used to bolster alcohol treatment programs in a state with the nation’s highest per capita rate of alcohol-related deaths.
Wirth acknowledged the tax hike would be smaller than advocates had pushed for, but said it would mark New Mexico’s first alcohol tax increase in roughly 30 years.
“I look at this is a first step —not the end,” Wirth said.
But other senators expressed disappointment, saying the proposed alcohol tax increase would do little to discourage consumption.
“We had an opportunity to make transformational change to address a huge social problem in our state, and we didn’t do it,” said Sen. Antoinette Sedillo Lopez, D-Albuquerque.
Film incentives and rebates play starring role
A proposed expansion to New Mexico’s film incentive program was another one of the key areas of dispute between the two legislative chambers.
The House initially balked at the Senate’s attempt to add to the tax package several different film-related provisions, including a gradual increase in the maximum state spending per year on rebates for direct, in-state expenditures.
But House negotiators relented Friday after reaching a deal on a plan that triples the amount of allowable incentives per film project — from $5 million to $15 million — for productions by Netflix or other studios that are members of a state film partnership.
The plan would also limit the amount of annual spending on such productions to no more than $40 million per year.
While the group of legislative tax negotiators sparred on film incentives and the proposed alcohol tax increase, there was little to no debate about rebates.
Under the tax package, all New Mexicans who filed 2021 tax returns would get $500 rebate checks by this spring. Married couples filing jointly would receive $1,000 checks.
“I think we’re all in agreement we want to leave rebates where they’re at,” Brandt said.
Legislative deal-making in the open
The conference committee meetings — there were five meetings spread over Thursday and Friday — were open to lobbyists and media members under a 2009 law that requires public access to legislative gatherings that, previously, had occurred behind closed doors.
The negotiating sessions were tense at times, including when Rep. Derrick Lente, D-Sandia Pueblo, bristled at suggestions by state Economic Development Secretary Alicia Keyes that a failure to approve changes to the state’s film incentive program could lead some productions to bypass the state.
He also accused senators of pulling a “poor use of a race card” when they proposed adding a Native American film incentive provision.
But the sessions also featured lighter moments, including references to Tom Cruise and Robert Downey Jr. on film sets in New Mexico.
And involved lawmakers said the negotiations had been as transparent as possible, even under deadline pressure.
“We wanted the negotiation to take place in public,” Brandt told the Journal.
