Tax proposals aim to boost economy, increase revenue

Copyright © 2017 Albuquerque Journal

SANTA FE – With New Mexico struggling to emerge from an ongoing budget crisis, several tax proposals aimed at bolstering the economy have surfaced at the Roundhouse.

Although some of the tax measures seek to raise revenue to replenish the state’s coffers, other proposals include a mix of tax cuts and tax hikes and are being crafted by GOP lawmakers – despite Gov. Susana Martinez’s vow to veto any tax increases approved by the Legislature.

The tax debate is playing out as New Mexico grapples with the budget crisis.

Sen. John Arthur Smith

Sen. John Arthur Smith

Senate Finance Committee Chairman John Arthur Smith, D-Deming, took to the Senate floor Monday, warning that lawmakers might have to come up with as much as $250 million in “new” money to bolster reserves and keep state programs running for the budget year that starts July 1.

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Whether changes to the state’s tax code are used to address the state’s budget problems will likely be a key theme of the rest of this year’s 60-day legislative session, which began last month.

Sen. Ron Griggs, R-Alamogordo, has filed legislation that would increase the tax on motor vehicle sales and levy a new tax on property sales, while cutting the corporate income tax rate and reducing taxes for seniors.

The measure, Senate Bill 343, would also reimpose a 3.75 percent tax on food items and a 2 percent tax on medical services – with revenue going to cities and counties – while doing away with a state subsidy for local governments that’s scheduled to be phased out over the next 13 years.

“The goal of the bill is to be fairly comprehensive, but not just tax people to raise revenue,” Griggs told reporters during a news conference Monday at the state Capitol.

But he acknowledged it would raise taxes in some areas, saying, “I’m not going to try to hide and say it doesn’t do that.”

Some top-ranking Democratic lawmakers, including House Speaker Brian Egolf, D-Santa Fe, have ruled out a reimposition of the food tax – which the state did away with in 2004 – during the legislative session.

That stance, combined with the governor’s, could signal an uphill battle for the tax package being pushed by Griggs, and a separate package crafted by Rep. Jason Harper, R-Rio Rancho, that has not been filed yet.

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Harper’s proposal is expected to also include a reimposition of the food tax, along with a reduction of the state’s gross receipts tax rate and the elimination of various state tax deductions and exemptions.

‘Loopholes’

There could be some wiggle room when it comes to closing tax “loopholes.”

For instance, Martinez, the state’s two-term Republican governor, is pushing a proposal to change how the state’s gas tax is collected.

While details are still being ironed out, the “tax at the rack” plan would shift the tax point from the distributor level to when fuel is removed from bulk storage terminals, in an attempt to improve the state’s effectiveness in collecting owed tax dollars.

It would not change the tax rate of 17 cents per gallon, though other proposals could seek to do that.

If enacted, the change would bring the state’s fuel tax collection more in line with the federal government’s, and could generate between $5 million to $15 million in additional annual state revenue.

“The governor stands by her promise: She will not raise taxes,” Martinez spokesman Chris Sanchez said Monday. “She does, however, support closing tax loopholes and modernizing the tax code.”

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Another effort to close a tax loophole could be requiring Amazon and other online retailers to collect gross receipts tax from customers, though Martinez has opposed that idea.

In addition, the governor’s tax stance, which she’s held since taking office in 2011, likely also means long odds for stand-alone tax hike proposals, which include a $1.50-per-pack cigarette tax increase and an alcohol tax hike.

New revenue numbers

Lawmakers have already enacted steep spending cuts and taken money from various government accounts in response to the revenue downturn, caused largely by falling oil and natural gas prices.

On the Senate floor, Smith said Monday that he hoped updated revenue numbers that will be released later this week will not show a further drop in revenue. And that would still require an infusion of up to $250 million for next year’s budget.

In addition, he cited a shortage of corrections officers at state-run prisons, a court system struggling for solvency and a public education system already feeling the pain of cuts.

“You need to wrap your heads around it,” he said. “We still have a huge, serious problem.”

A House budget-writing committee is expected to roll out its spending plan for the coming year sometime in the next two weeks. The budget plan would go to the Senate, before possibly being sent on to the governor’s desk.

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