Saturday, February 15, 2003
Governor Signs '03 Tax Cuts
By David Miles
Journal Capitol Bureau
SANTA FE Gov. Bill Richardson swiftly signed a state tax cut package into law Friday, giving New Mexicans breaks on income and capital gains obligations and marking a major legislative victory just seven weeks after taking office.
"Our Valentine's gift to working families in New Mexico is this historic tax reduction package that puts money in New Mexicans' pockets and declares our eagerness to create jobs and improve and grow our economy," Richardson said at the Capitol.
The measure will reduce the state's top personal income tax rate from 8.2 percent to 4.9 percent over five years and will cut the state's capital gains tax by 50 percent over the same time period.
The cuts become available for the 2003 tax year.
A married couple earning more than $100,000 a year in taxable income and filing a joint tax return will see their income taxes drop by an average of $5,458 once the cuts are fully implemented in 2007. However, tax cuts will vary widely on a case-by-case basis because the top rate of 4.9 percent would apply to all taxable income exceeding $24,000 for married couples filing joint returns.
The House and Senate earlier Friday had unanimously approved the compromise tax cut measure (conference committee report for HB 167, SB 167) on voice votes.
Passage of the measure marked a speedy political milestone for Richardson, who promised to slash taxes during his successful 2002 campaign and who took office Jan. 1.
Legislators, who convened their 60-day session on Jan. 21, broke with longstanding practice and considered the tax measure before approving a state budget.
Senate President Pro Tem Richard Romero, D-Albuquerque, praised Richardson for pushing legislators to slash taxes on personal income and capital gains.
"It's not only historic in the fact that we are cutting taxes, but at the rate that we've done it," Romero said.
The tax cut package was a rare development in another regard: New Mexico, Wyoming and Arkansas are the only states not suffering from budget deficits this year, according to a recent survey by the National Conference of State Legislatures. Most states are slashing spending, not cutting revenue.
And the income tax cut was similar to the one sought by Richardson's predecessor, Republican Gov. Gary Johnson.
House Minority Leader Ted Hobbs, R-Albuquerque, called the New Mexico measure the most "significant" tax cut package he had seen since becoming a legislator in 1995.
"Republicans have been after this for over 10 years; we've finally got it done with the help of everybody else, the Democrats and the governor," Hobbs said.
The tax cut package, a compromise negotiated this week by a six-member legislative conference committee, slows down implementation of the measure but does not contain a "circuit-breaker" provision opposed by Richardson.
The original bill would have lowered the top income tax rate to 5 percent over four years, rather than the 4.9 percent over five years, and would have cut capital-gains taxes by 50 percent over that same time period.
The final version of the new law does not contain a provision that would have prevented the tax cut from fully taking effect if the state's fiscal outlook dimmed.
House Speaker Ben Lujan, a Santa Fe Democrat who backed the circuit-breaker provision, said he would recommend that a proposed tax reform commission make the provision its "highest priority."
The commission would be charged with making recommendations by Sept. 1 on overhauling the state's tax code. Richardson has said he plans to call legislators back to Santa Fe this fall for a special session to revise New Mexico's tax laws.
Lujan said extending the tax cuts over five years will ease the loss of revenues to state government.
The compromise version is estimated to cost nearly $360 million when fully implemented, although Richardson hopes the measure will stimulate economic activity and at least partially offset the loss of revenues to state government.
Richardson also argues that lowering the top personal income tax rate will attract businesses to New Mexico.
Lujan said enactment of the tax cut package marked a "great day for New Mexico" and will make the top personal income tax rate lower than those of Arizona, California, Utah and Oklahoma.
John Carey, president of the Association of Commerce and Industry of New Mexico, applauded enactment of the tax cut package.
"This sends a real positive signal all over the country and abroad that New Mexico is open for business," Carey said. "Our members are just thrilled and proud."
Sen. Sue Wilson Beffort, an Albuquerque Republican who helped negotiate the compromise, described the measure as a victory for all of the political players involved.
"I think that there were wins on all sides," Wilson Beffort said. "The governor won, the Republicans won, the Democrats won, the Senate won, the House won."