Friday, February 14, 2003
House, Senate Set Deal on Tax Cuts
By Barry Massey
The Associated Press
SANTA FE House and Senate negotiators reached a tentative agreement on a compromise five-year tax reduction package that eliminates a circuit-breaker provision opposed by Gov. Bill Richardson.
"I think it is a true compromise," House Speaker Ben Lujan, D-Santa Fe, said Thursday.
Lujan declined to release details of the agreement, but acknowledged that the compromise eliminated a House-backed provision that could have delayed parts of the proposed personal income tax cuts if the state's finances weakened.
It's possible the House and Senate will debate and vote today on the tax plan if the agreement remains intact after it's outlined to rank-and-file Democrats and Republicans in the two chambers.
House Democrats earlier had insisted on the circuit-breaker as a possible safety valve to protect against a budget shortfall if state revenues slipped unexpectedly when the last and most expensive phases of the tax cut were taking effect. Richardson and the Senate had opposed the circuit-breaker.
Under the four-year tax reduction measures approved previously by the House and Senate, the third year of the tax cut when the rate was to fall to 6 percent would have cost nearly $100 million. The final year, when the rate was to fall to 5 percent, would have cost more than $150 million in lost revenue.
Gov. Bill Richardson said he was open to a five-year phase-in of the tax cut.
"I want to be reasonable about it. I want a tax cut without the circuit-breaker," said Richardson.
The governor says lowering the top income tax rate will make New Mexico more competitive with other states and help in recruiting high-wage businesses.
Dropping the top rate to 4.9 percent would give New Mexico a lower top marginal rate than Arizona, which is at 5.04 percent.
The governor stressed that he wanted the Legislature to give final approval to a tax cut as soon as possible.
"I want to give New Mexicans a tax cut. I want to send a ... signal that New Mexico is business friendly."