Senate passes tax package aimed at incentivizing physicians, affordable housing projects

SANTA FE — A sweeping tax package that would create new tax breaks for New Mexico physicians, local news organizations and affordable housing projects is headed to the House, where it could be beefed up even more.

The Senate voted 24-17 late Sunday to approve the measure, which includes parts of six different tax bills filed during this year's 30-day legislative session.

Two Democrats — Sens. Debbie O'Malley of Albuquerque and Shannon Pinto of Tohatchi — joined with the chamber's GOP members in voting against the measure. All other Senate Democrats voted in favor.

The bill, Senate Bill 151, would raise an estimated $111.5 million in annual revenue for the state by decoupling the state's corporate income tax from several components of a federal budget bill signed by President Donald Trump last summer.

Those federal tax changes played a key role in New Mexico revenue projections being scaled back in December, but critics said if the state distances itself from them it would lead to a tax hike for businesses.

"It is in fact increasing taxes on productive capital and those are the types of expenditures we need to be encouraging in this state," said Sen. Larry Scott, R-Hobbs.

Meanwhile, the revenue generated by the corporate tax change would be partially offset under the bill by authorizing about $61 million in tax credits and deductions. More tax breaks are expected to be added in the House, ultimately making the tax package revenue-neutral.

Current tax breaks in the bill include a $10,000 personal income tax credit for full-time New Mexico physicians and a gross receipts tax deduction for the sale of certain health care equipment. Also included are two tax breaks for local news organizations — one for newspapers printed in the state and the other for employing local journalists.

Sen. Carrie Hamblen, D-Las Cruces, one of the bill's sponsors, faced several questions during Sunday's debate from Republican senators about those journalism-focused tax breaks.

Sen. Ant Thornton, D-Sandia Park, was among the most succinct in his remarks, saying, "I don't think the government should be involved in journalism." 

In response, Hamblen, a former radio journalist, said many parts of New Mexico are suffering from a dearth of local reporting, while also citing the recent closure of the Gallup Independent.  

She also said the tax credits were part of bill architects' plan to bolster certain segments of the state's economy. Other tax provisions were considered for the bill but were deemed to have too large of a fiscal impact to be included, Hamblen added.

"I do feel like we can have some great impact on New Mexico residents," she said.

However, concern over some of the tax provisions ultimately costing the state more in foregone revenue than currently projected prompted some guardrails to be added to the bill. That includes scheduling the tax break on construction materials and labor for affordable housing projects to expire in July 2029.

Meanwhile, at least some of the opposition to the bill came from concerns over its potential impact to local governments, which rely on gross receipts tax revenue as a key funding source.

O'Malley, a former Bernalillo County commissioner, voiced specific concern the tax package could force Albuquerque, the state's most populous city, to have to raise revenue elsewhere to avoid funding cuts for key social service programs.

Dan Boyd covers state government and politics for the Journal in Santa Fe. Follow him on X at @DanBoydNM or reach him via email at dboyd@abqjournal.com.