Gov. Susana Martinez joined 20 Republican governors in support of federal tax cuts. The letter to Senate Majority Leader Mitch McConnell, R-Kentucky, and Speaker of the House Paul Ryan, R-Wisconsin, didn’t advocate for either plan passed by the House or Senate, but instead called for general principles in a tax overhaul. The House and Senate each passed different plans, necessitating a conference committee for the two to reconcile language. The narrow Republican majority complicates the measure, as does the House Freedom Caucus, a bloc of hardline conservative Republicans in the House, including New Mexico’s Rep. Steve Pearce. They touted tax cuts made since 2011, and the economic growth they say the cuts caused.
If it had passed in its original form, the tax overhaul supported by the governor and legislative Republicans during the recent special session would have hurt the state. That’s the news from the finalized fiscal impact analysis done by staffers with the Legislative Finance Committee, first flagged by the Albuquerque Journal. According to the analysis, a technical error on the part of the bill’s drafters threw off revenue estimates by more than $100 million. The error had to do with the repeal of a nonprofit receipts exemption that applies to nonprofit organizations, including hospitals. The bill itself was finalized shortly before the special session began and was introduced hours after the special session came to order.
A complex tax overhaul bill failed to clear its committee, and that’s going to further complicate the special session in which legislators are supposed to address the budget in New Mexico. Rep. Jason Harper, R-Rio Rancho, presented his 430-page tax overhaul bill Thursday morning. It took him nearly an hour to describe the bill to the House Labor and Economic Development Department. “That in very high-level, broad terms is what is in this bill,” Harper said when he finished describing the bill and how it differed from a similar bill legislators already passed in March. After public comment and questions from the panel, the committee voted 6-5, on party lines, to table the bill.
Questions on what can be accomplished during a special session linger even as legislators head to Santa Fe today. The main priority for legislators is a budget. Legislators must pass a new budget after Gov. Susana Martinez vetoed the entire budgets of higher education and the Legislature. If a new budget isn’t passed before the start of the next fiscal year, which begins on July 1, New Mexico community colleges and universities will have no money. But Martinez also wants legislators to address a massive tax overhaul and confirm two University of New Mexico regents.
Gov. Susana Martinez met with legislative leaders Friday morning to discuss a budget fix ahead of the upcoming special session scheduled to start next Wednesday. Martinez’s spokesman, in a statement, called the meeting “productive” and said the governor is confident her office would come to an agreement on funding the coming fiscal year, “including funding for higher education.”
“The Governor reiterated that she will not support standalone tax increases, but is hopeful that we will be able to find a bipartisan path forward on tax reform,” spokesman Michael Lonergan said. The statement potentially leaves room for tax increases as a part of a comprehensive tax overhaul similar to what state Rep. Jason Harper, R-Rio Rancho, spearheaded during the recent general legislative session. Martinez last week told the Santa Fe New Mexican that she would support reinstating the food tax as part of such a reform—a marked contrast from even just two months ago when she vowed to “definitely veto every tax increase on my desk.”
State House Speaker Brian Egolf, D-Santa Fe, however, told NM Political Report that “there is still tremendous uncertainty about what sort of tax reform proposal is going to be offered during the [special] session.”
Egolf described the meeting with Martinez as “a first crack” at agreeing to a budget solution. “It wasn’t really a horse trading kind of thing,” Egolf said.
Gov. Susana Martinez would be willing to sign a food tax into law if it were part of a larger tax reform. The governor told media this after a speech at the Economic Forum of Albuquerque at the Hotel Albuquerque Wednesday. Purchases of food are exempt from the state’s gross receipts tax and have been since 2004. Those who support the exemption say the tax has a larger impact on poor New Mexicans, since food represents a higher percentage of their spending. Martinez did say she would oppose the food tax as a “standalone piece,” according to both the Albuquerque Journal and the Santa Fe New Mexican.
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.