A wide-ranging tax bill that passed the House of Representatives in a unanimous vote ran into obstacles at a Senate hearing Wednesday and isn’t likely to advance in the 2017 Legislature. “Anything still has a chance of moving,” said Sen. Clemente Sanchez, D-Grants, chairman of the Senate Corporations and Transportation Committee, after a four-hour hearing on House Bill 412, sponsored by Rio Rancho Republican Rep. Jason Harper. But during the hearing, lawmakers were more skeptical as they heard concerns from lobbyists for doctors, hospitals, broadcasters, nonprofit organizations, schools, farmers, the dairy industry, hospice nurses and nursing homes about how the tax changes would affect their operations. Related: NM’s revenue still hasn’t recovered to pre-recession levels
Harper was not surprised. “We’ve jokingly called this bill the lobbyist full-employment act.
An effort that had broad support to bring in more money to New Mexico government by taxing all internet sales has mushroomed into a measure to raise additional money from hospitals, trucking companies, nonprofit organizations and car buyers. Democrats say the amendments to House Bill 202, originally an effort to raise $30 million by expanding the gross receipts tax to out-of-state internet transactions, are necessary to restore cash reserves and put the state on better financial footing to avoid further cuts to school districts and another credit downgrade. With the changes, the bill is now expected to bring in $265 million in ongoing revenue. Some $1 million a year would come from the legislative retirement fund. A sponsor of the tax bill, Rep. Carl Trujillo D-Santa Fe, said lawmakers have cut spending, both during the 2016 session and again in an October special session.
While state lawmakers are pulling out all the stops to find “now money” to plug an expected deficit in the next fiscal year, Rep. Jason Harper has introduced a bill he hopes can put the state on better financial footing for decades to come. Harper, R-Rio Rancho, admits that House Bill 412, the New Mexico Tax Reform Act, is not a quick fix and will not patch the budget in fiscal year 2018 or even 2019. But by restructuring the state gross receipts tax and simplifying income and other tax policies, New Mexico will position itself for more solid growth in the new economy, he said. “It doesn’t help us fix the current budget problem,” Harper said of his bill, “but this hopefully prevents another budget problem.” The measure comes halfway through the 2017 legislative session, when reserve funds have been depleted by efforts to balance budgets for the last fiscal year and the current year, which ends in June, and many lawmakers are focused on raising enough new money to get through the upcoming year.
If the state of New Mexico wants to get back on solid financial footing it has to take on some sacred cows, according to Sen. Ron Griggs. Griggs, a Republican who is the former mayor of Alamogordo, calls the omnibus tax bill he is sponsoring the start of that conversation. The bill not only brings back the gross receipts tax on food and medicine — albeit at a lower rate — but it raises the fee to transfer ownership of a motor vehicle and imposes a new fee to transfer or refinance real estate. Senate Bill 343 would also reduce the corporate income tax, eliminate taxes on interest income, which would benefit retirees over 55, and help cities and counties with their budget challenges. Large, complicated tax measures have not always fared well in the Legislature.
Media coverage of planned tax legislation has so far focused on one hot-button topic of the proposal—reinstating a state tax on food. Santa Fe Archbishop John C. Wester and advocacy groups like New Mexico Voices for Children have vocally opposed the idea. But the two state representatives behind the proposal have not actually filed any legislation on the matter for the session that begins in January. Legislators could begin introducing bills on Dec. 15.