Republican Gov. Susana Martinez on Tuesday vetoed a bill changing the way some big out-of-state companies file their corporate taxes — a change Democrats said would plug a loophole and ensure New Mexico gets what it’s owed.
Martinez called it “a tax increase on an arbitrarily chosen set of retailers that would kill jobs, pass higher prices on to consumers and drive business out of the state.”
Her veto of Senate Bill 9 was no surprise; she had said all along she didn’t like it.
But Sen. Peter Wirth, D-Santa Fe, who finally got the so-called combined reporting bill through the Legislature after eight years of trying, said he was “extremely disappointed.”
“New Mexico businesses are the big losers today with this veto,” he said.
Wirth’s bill, as passed, would have applied only to “big-box” retailers such as Walmart — stores with more than 30,000 square feet under one roof.
The legislation also would have reduced the top tax rate for all corporations from 7.6 percent to 7.5 percent.
It would have required multistate corporations to file reports combining their profits from all states, to which a formula would be applied to determine New Mexico’s tax share.
Corporations can do that now — and some already do. But they also have the option to report as separate New Mexico subsidiaries, which Wirth said allows profits earned in New Mexico to be shifted to other parts of the company in states where there is no corporate tax. A New Mexico store, for example, might deduct from its taxable income substantial “payments” to a home office for use of the company logo.
Wirth said it’s “fundamentally unfair” to give out-of-state corporations such preferential treatment.
But Martinez said Wirth’s bill would effectively raise taxes on big-box grocery, clothing and home improvement stores while cutting taxes for corporations such as large banks, casinos and payday loan companies.
She said that was “misguided and arbitrary tax policy” and “not the way to foster economic growth in New Mexico.”
Today is the deadline for the governor to act on legislation passed in the 30-day session that ended Feb. 16.
♦ In other action Tuesday, Martinez also vetoed a bill that would have shored up the financing of pensions for judges and magistrates. The measure, House Bill 72, which was passed unanimously by the House and Senate, would have increased the government’s pension contributions.
— This article appeared on page C01 of the Albuquerque Journal