Thursday, January 30, 2003
Senate Panel Supports Income-Tax Cuts
By Barry Massey
The Associated Press
SANTA FE Gov. Bill Richardson's proposal for a four-year, $300 million personal income tax cut cleared its first hurdle in the Legislature on Wednesday.
The Senate Corporations and Transportation Committee unanimously endorsed the governor's proposal to phase in a reduction of the top marginal rate of the personal income tax from 8.2 percent to 5 percent.
The proposal also would lower taxes on capital gains over four years.
Richardson has urged the Legislature to push through his tax reduction package within the next two to three weeks. Based on the Senate panel's quick action, it appears lawmakers are responding to Richardson's appeal.
The measure heads to the Senate Finance Committee for consideration.
Sens. Carlos Cisneros, D-Questa, and Sue Wilson Beffort, R-Albuquerque, sponsored the governor's proposal. They said lowering the top tax rate would help stimulate economic growth and aid in recruiting businesses to New Mexico.
"I think this bill is really ... a jobs bill," Beffort said.
The first year of Richardson's income tax package would drop the top marginal rate from 8.2 percent to 7.7 percent. That change would cost about $17 million and would take effect in the 2003 tax year. The first year of the expanded capital gains deduction would cost $4.2 million.
Under the current income tax system for a married couple filing a joint return, the top marginal rate of 8.2 percent applies to taxable income over $100,000 that's income after deductions. The next rate of 7.9 percent applies to income between $64,000 and $100,000.
Under Richardson's proposal, the proposed 7.7 percent rate would apply to income of $64,000 and above for married joint filers and income above $42,000 for single tax filers.
Once fully implemented, Richardson's proposal calls for a top marginal rate of 5 percent on taxable income over $24,000 for married joint filers or income above $16,000 for single tax filers.
Tax officials say the first year of Richardson's proposal would mean an average $200 reduction for slightly more than 80,000 tax filers roughly 15 percent of all tax returns that owed money to the state.
After all of the income tax changes are in place, the tax reduction would average $900 and benefit about 55 percent of New Mexico's tax filers, according to the Taxation and Revenue Department.
Senate Majority Leader Manny Aragon, D-Albuquerque, questioned why the governor didn't try to adjust income brackets in his proposal to offer additional tax relief to more lower income taxpayers.
The committee also endorsed a competing income tax reduction package sponsored by Aragon, which drops the top marginal rate to 5.5 percent over two years and adjusts income brackets. Once fully implemented, for example, the top rate would apply to income of $45,001 and over for married couples filing joint returns and $22,501 and above for single filers.