New Mexico will offer beefed-up tax incentives to investors, high-tech employers and corporations with in-state headquarters, after Gov. Susana Martinez signed into law Monday a revamped tax package that appeared doomed just weeks ago.
The second-term Republican governor said the legislation, approved by lawmakers during a single-day special session last week, will bolster the state’s economic competitiveness and employment levels.
“It provides us with additional tools to help us compete for new jobs, new inventions and new businesses in the tech industry,” Martinez told a news conference at an Albuquerque research park.
The tax package will renew and expand roughly a half-dozen tax incentives on the state’s books – most of them take effect in January 2016 – and will also create at least two new tax breaks.
Its provisions include keeping alive a tax deduction – of up to 25 percent – on out-of-pocket medical expenses that as many as 300,000 New Mexicans have used annually in the past years.
Business groups had pushed for the tax package legislation to be included on the special session agenda, saying it would help create new jobs.
Gary Tonjes, president of Albuquerque Economic Development, said the new tax incentives were already generating out-of-state inquiries about New Mexico.
“These strategic moves are making important structural changes to (the tax code of) the state of New Mexico,” Tonjes told Monday’s news conference.
The tax package passed the House and Senate by decisive margins during the June 8 special session. It was approved 60-2 in the GOP-controlled House and 31-11 in the Senate, where Democrats hold a majority.
However, Democratic Party of New Mexico Chairwoman Debra Haaland blasted the legislation Monday, saying Democratic legislators agreed to back the tax package to shore up support for a $295 million infrastructure bill that was also approved in the special session.
“We don’t believe the tax package will create new jobs or help the small businesses that are the backbone of the state’s economy,” Haaland said in a statement. “We do believe the tax package favors out-of-state corporations at the expense of New Mexico taxpayers.”
In all, the tax package is expected to cost between $6.5 million and $11.5 million per year in forgone revenue once it’s fully phased in, according to the Martinez administration.
But Martinez told reporters she is not concerned about the legislation undermining the state’s revenue base, saying the cost to the state “is nothing compared to the revenue that can be generated.”
In addition to the deduction on medical expenses, other pieces of the tax package include:
• Expanding and extending a credit for investments in New Mexico-based startup companies.
• Creating a tax deduction for contractors to sell certain high-tech goods or services to the U.S. Department of Defense.
• Allowing companies with corporate headquarters in New Mexico to use a different formula to calculate their state corporate income taxes.
• Pushing back the expiration date of a tax deduction for companies that locate in the Mexican border zone area in New Mexico.
Economic Development Secretary Jon Barela said the various incentives are the Martinez administration’s latest attempt to make the state’s tax structure more business-friendly. Previous tax breaks were signed into law in 2012 and 2013.
“The sun is definitely rising on our private sector today,” Barela said Monday.
Meanwhile, Martinez has not signed the $295 million capital improvements bill but told reporters she intends to do so later this week.