Wednesday, February 12, 2003
Tax Cuts Pass With Ease in Senate
By David Miles
Journal Capitol Bureau
SANTA FE The Senate on Tuesday overwhelmingly approved a state tax cut package without a House-approved provision that would have prevented it from fully taking effect if New Mexico's fiscal outlook worsens.
The Senate approved the bill (committee substitute for HB 167, SB 167) on a 39-2 vote and sent it back to the House. Democratic senators Michael Sanchez of Belen and Leonard Tsosie of Crownpoint cast the votes against the bill.
After the vote, Sanchez and Tsosie said they were concerned that the tax cut package would lead to a decline in state revenues.
The House is not expected to accept the Senate changes. That would set the stage for negotiations between the two chambers.
Gov. Bill Richardson objected to the House "circuit-breaker" provision and this week said he hoped the Senate would remove it from the bill.
The bill would reduce the top state personal income tax rate from 8.2 percent to 5 percent over four years and cut the state's capital gains tax by 50 percent over the same period.
The proposal would cost $325 million a year if fully implemented.
On a 23-16 vote, the Senate defeated an alternative tax cut package sponsored by Sen. William Sharer, R-Farmington. That proposal would have accelerated the income tax cuts and then lowered the top income tax rate more if state revenues from gross receipts taxes increased by a certain amount.
Sharer said his proposal would allow Richardson to spur economic development more with tax cuts.
"The governor asked for some tools; let's give him some power tools," Sharer said.
Some Democrats said approving Sharer's proposal would further antagonize House members.
"We don't need to hit them that hard," said Sen. Tim Jennings, D-Roswell.
The tax cut package would lower the state top income tax rate to:
7.7 percent in the 2003 tax year;
7 percent in the 2004 tax year;
6 percent in the 2005 tax year;
5 percent in the 2006 tax year.
The measure also would reduce the state's capital gains tax by:
10 percent in the 2003 tax year;
20 percent in the 2004 tax year;
30 percent in the 2005 tax year;
50 percent in the 2006 tax year.
In other action Tuesday, the Senate unanimously approved a bill to create a 17-member tax reform commission to make recommendations by Sept. 1 on overhauling the state's tax laws.
Richardson has said he plans to call legislators back to Santa Fe this fall for a special session to revise New Mexico's tax code.