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Governor Supports Tax Increases

By David Miles and Loie Fecteau
Journal Staff Writers
    SANTA FE— Gov. Bill Richardson on Wednesday came out in favor of a Senate Democrat-drafted bill that would result in a net $135.5 million increase in state and local taxes and fees.
    The proposed increases, which would start taking effect early next year if adopted, include increases in the state's motor-vehicle registration fees and taxes on alcohol, motor-vehicle purchases, oil production and diesel and other "special fuels."
    "I think that they're all palatable to me," the governor said.
    Richardson successfully pushed nearly $360 million worth of tax cuts on income and capital gains through the Legislature earlier this year. He later portrayed himself as a tax-cutter in an advertisement in The Wall Street Journal this year.
    The Democratic governor on Wednesday focused on several of the tax cuts included in the bill, sponsored by Sen. Ben. Altamirano, D-Silver City, Senate Majority Leader Manny Aragon, D-Albuquerque, and five other Senate Democrats.
    "What I am proposing is tax relief for 650,000 New Mexicans, and I urge the Legislature to pass it," Richardson said.
    Most of the proposed net increases in taxes and fees from the Senate bill— nearly $74 million— would go to the state's Road Fund for highway construction and repair projects. However, the bill also would fund Richardson's $1.5 billion plan for 40 transportation projects by issuing bonds.
    Some of the new tax revenue also would help cover soaring Medicaid health care costs for lower and middle-income New Mexicans.
    Senate President Pro Tem Richard Romero, D-Albuquerque, said the tax bill might have a tough time getting out of the Senate because of the proposed tax and fee increases.
    "I'm not supporting it," Romero said. "It's a real difficult one for anybody to support."
    Democrats have only a 24-18 vote majority in the 42-member Senate, and 22 votes would be required to pass the bill.
    House Minority Leader Ted Hobbs, R-Albuquerque, said Republicans in his chamber would vote against any bill that contained tax increases. But Hobbs said he wasn't sure if any Democrats would break ranks to vote against the bill.
    Hobbs also said Richardson was being less than candid in characterizing the bill as an economic-growth package.
    "He told half the story," Hobbs said.
   
Liquor industry objects
    Richardson said he would work with the Legislature "on how to finance" the tax cuts contained in the package. But he said the proposed increase in liquor taxes is "good social policy."
    "I believe that it makes sense to put liquor taxes on the table," he said.
    Three liquor industry groups this week started running a radio ad in Albuquerque and Santa Fe noting that New Mexico already has one of the highest alcohol taxes in the country.
    The ad also contends that alcohol-tax increases would mean hospitality-industry employees would lose their jobs.
    "This is not a tax on alcohol, it's a tax on hospitality," said Frank Coleman, senior vice president of the Distilled Spirits Council of the United States, which has headquarters in Washington, D.C.
    The group, along with the New Mexico Alcohol Beverage Wholesalers Association and the Wine Institute, paid for the ad, Coleman said.
    Two Anheuser-Busch employees arrived at the Roundhouse on Wednesday as part of the beer company's campaign against alcohol-tax increases.
    The governor criticized liquor industry lobbyists, whom he said were "active and spreading falsehoods," including that a tax increase could hurt tourism in New Mexico.
    "I'm ready for a good fight," Richardson told reporters.
    House Speaker Ben Lujan, D-Santa Fe, said he supported the bulk of the Senate tax bill, much of which he said was recommended by the state's Blue Ribbon Tax Reform Commission.
    But Lujan said he thought the liquor industry would take too big a hit with the proposed liquor tax increase, raising state and local alcohol taxes by nearly $70 million.
    "I think the burden should be distributed more equally among other taxpayers in the state," Lujan said.
   
Oil and gas support
    Richardson said the proposed tax increase on petroleum was fair and would equalize New Mexico with other states and that the oil and gas industry was ready to accept it.
    "You're never happy about a tax increase, but we understand the big picture," said Bob Gallagher, president of the New Mexico Oil and Gas Association.
    Richardson acknowledged some Democratic legislators are wary about voting for tax increases just before an election year. All 112 House and Senate seats are up for grabs next year.
    "I think voters will see this package as an economic growth package," Richardson said. "If I were a legislator, I would be concerned about voting against tax cuts."
    The governor said reports of the special session's demise because of a lack of agreement on tax issues were "premature."
    Lujan said he was still hopeful legislators and Richardson could reach an agreement on the tax and economic growth issues during the special session.
   
Tax bill provisions
    Here is a summary of key provisions included in a 188-page tax bill backed by Gov. Bill Richardson and sponsored by seven Senate Democrats.
    It is estimated the bill overall would result in net state and local tax and fee increases of $135.5 million in the next fiscal year, which begins July 1, 2004.
    Each provision listed below is followed by its revenue impact on state and local governments in the next fiscal year. (Plus) indicates a tax or fee increase and (minus) indicates a reduction.
   
  • More than double the excise tax on the purchase of alcohol; (plus $69.9 million).
       
  • Raise excise tax on purchases of motor vehicles from 3 percent to 4 percent; (plus $40.9 million).
       
  • Increase weight-distance tax on trucks by 42 percent; (plus $23.4 million).
       
  • Raise tax on diesel and other "special fuels" from 18 cents a gallon to 23 cents a gallon; (plus $23.2 million).
       
  • Increase tax on oil production from 3.15 percent to 4 percent; (plus $12.8 million).
       
  • Impose a compensating tax on the purchase of out-of-state services; (plus $10 million).
       
  • Increase a surcharge on rental cars and short-term leased vehicles from $2 a day to $4 a day; (plus $6.4 million).
       
  • Expansion of Low Income Comprehensive Tax Rebate, which would be renamed Family and Individual Rebate; (minus $22.8 million).
       
  • Increase income-tax exemptions for lower- and middle-income taxpayers; (minus $22.2 million).
       
  • Allow health-care providers to deduct their taxable gross receipts received from managed care companies and certain Medicare payments; (minus $20.7 million).
       
  • A $2,500 income-tax exemption for higher-income New Mexicans who are at least 65 years old; (minus $10 million).
       
  • Gross-receipts tax exemption on concerts, boxing, wrestling, auto racing and other one-time sporting events; (minus $3.5 million).
       
  • Tax credit for companies that create high-paying jobs; (minus $900,000).