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Budget Plan Has Sales Tax Increase

By Dan Boyd
Copyright © 2010 Albuquerque Journal
Journal Capitol Bureau

          SANTA FE — More details on tax hikes and spending cuts in a new state budget plan emerged Sunday as New Mexico lawmakers prepared to return to the Capitol today for a special session on the budget.
        The plan, hammered out behind closed doors by top-ranking House and Senate Democrats, would increase the state's gross receipts tax, raise the tax on cigarettes and have New Mexico cities reinstate a portion of the gross receipts tax on food items that was repealed six years ago.
        Most state agencies would see a 2 percent cut in funding next year, though public education would have its total funding reduced by about 1 percent compared with this year's spending level.
        The state's Department of Public Safety would be one of the few, if not the only, agency to receive more funding under the terms of the tentative agreement.
        The plan would result in slightly more than $233 million per year in new taxes as well as less money for government services as the state grapples with a projected deficit of between $500 million and $600 million for the budget year that begins in July.
        During an informal Sunday meeting of the House Appropriations and Finance Committee, committee members received a briefing on the new $5 billion-plus budget plan and its proposed tax hikes.
        Some highlights:
        • The state's gross receipts tax base rate would jump from 5 percent to 5.25 percent, generating an estimated $119 million per year. This tax increase would be permanent.
        • The tax on cigarettes would go up 50 cents per pack, from 91 cents to $1.41. The increase would generate about $24 million annually. Smoke shops on tribal lands would also agree to levy the tax, though tribal governments would keep the extra revenue.
        • Municipalities would impose their local gross receipts tax rate on the purchase of food items. The state portion of the gross receipts tax on food wouldn't be imposed, and the state would stop compensating cities for their lost food tax revenue. This change would generate about $71 million for the state.
        Democratic leaders from the House and Senate drafted the budget plan in private over the last several days after the two chambers failed to reach agreement on a new budget in the 30-day regular legislative session that ended Feb. 18.
        Gov. Bill Richardson called for a special session on the budget to begin today to finish the work. By law, the Legislature must produce a balanced budget each year.
        Though some dissent is expected, architects of the budget compromise have said they hope the deal will be approved quickly and the special session — which will cost about $50,000 per day — will wrap up by Wednesday.
        "I can't imagine that things are going to be so cantankerous that we won't be able to finish," said Rep. Danice Picraux, D-Albuquerque. "Our leadership clearly knows where we're at."
        Some lawmakers from both political parties have criticized the secretive way in which the budget deal was orchestrated by leading legislators.
        One lawmaker, Rep. Benjamin Rodefer, D-Corrales, called Saturday for a joint caucus of House and Senate Democrats after learning which tax measures leaders had agreed upon.
        "That is not even close to the will and intent of either Democratic caucus," Rodefer said. "It is high time that we all get together, sit in the same room, talk this through and work as a team to create a better future for New Mexico."

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