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Tax increase goes before Senate panel today

SANTA FE – A key Senate budget committee plans to vote today on a retooled tax increase package that could generate as much as $350 million in the coming year by targeting commercial trucks, online sales, certain hospitals and New Mexico’s gasoline tax rate.

The plan, a top Senate Democrat indicated Thursday, is to advance the bill along with Rep. Jason Harper’s bill that would overhaul the state’s gross receipts tax system by closing more than 100 deductions and lowering state and local rates.

“We’re just trying to close the (budget) gap and build a positive direction,” said Senate Finance Committee Chairman John Arthur Smith, D-Deming, during a committee hearing Thursday.

While Gov. Susana Martinez has vowed to veto any tax increases approved by the Legislature, the Martinez administration has indicated the governor is open to closing tax “loopholes.”

That could open the door to some revenue-generating measures, including a provision to do away with a tax deduction for nonprofit hospitals.

The tax bills are a key part of this year’s budget debate at the Roundhouse, which is intensifying in the homestretch of the 60-day session as lawmakers seek ways to avoid additional spending cuts to public schools and other state programs.

The tax bill discussed Thursday, House Bill 202, was approved by the House last month as a companion measure to a $6.1 billion spending plan for the coming fiscal year, which starts in July.

Without the tax increases, spending levels prescribed in the budget bill would end up being about $218 million more than is expected in state revenue.

Proposed Senate Finance Committee changes to the bill would actually increase the amount of revenue generated – from $265 million to $350 million – by increasing the state’s gasoline tax rate by 10 cents a gallon.

The Senate has already approved a separate gas tax bill, but a Martinez spokesman said she would veto it if ends up on her desk.

Other proposed changes to the House-approved tax package include narrowing the health care tax change to affect only hospitals – not independent practitioners – and reducing how much more commercial trucks would have to pay for permit fees.

Sen. Carlos Cisneros, D-Questa, said Thursday that committee members worked with the New Mexico Hospital Association to finely tune the legislation, and Rep. Carl Trujillo, D-Santa Fe, the bill’s sponsor, told committee members he didn’t object to the proposed changes.

“I’m very happy the Senate has worked with the hospitals,” Trujillo said.

If the tax package reaches Martinez’s desk, the governor would be able to use her line-item veto authority to ax certain parts of the bill without vetoing all of it.

Meanwhile, the gross receipts tax overhaul bill, House Bill 412, sponsored by Rep. Harper, R-Rio Rancho, and co-sponsored by Sens. Smith and Cisneros, was assigned to two Senate committees Thursday – the Corporations and Transportation Committee and the Finance Committee – after passing the House the day before.

The legislation is expected to move quickly as part of a potential budget deal between the Legislature and the governor.

Before passing the House, the measure was amended to narrow its focus. One key change left in place is the tax exemption for the purchase of food, which was enacted in 2004.

House Democrats had balked at the idea of bringing back the food tax, with House Speaker Brian Egolf, D-Santa Fe, recently calling it a “deal-breaker.”

Leaving the food tax exemption in place means the state would continue paying a “hold harmless” subsidy to cities and counties for the next 13 years, Harper confirmed Thursday.

Initially, Harper’s bill had called for the hold harmless payments – which are intended to offset foregone tax revenue – to be eliminated.

The other major House amendment to the tax overhaul bill was eliminating a proposed fix to “tax lightning,” which occurs when property taxes jump dramatically when a home is purchased.

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