Monday, June 5, 2023

Governor’s Veto Pen Punctures Tax Bill that Tried to do too Much


There were plenty of signs that the “omnibus tax bill” would not waddle into law books, even before the governor began questioning whether it was sustainable.

In the recent legislative session, lawmakers and media kept calling House Bill 547 a “tax reform” measure. It wasn’t. It was more of a wish list – a bunch of bills strung together during the session with little consideration for their individual or collective impact.

The sponsor of HB 547, Rep. Derrick Lente, D-Sandia Pueblo, is new to taxation. Lente’s passion and driving interest is tribal education, not tax reform. House Speaker Javier Martinez made Lente chairman of the House Taxation and Revenue Committee in his reshuffling of committee chairs.

Before the ink was dry, business groups lined up in opposition because the bill would raise taxes during a year of surplus revenues and would hobble the state’s businesses. The business community was also mightily annoyed that lawmakers ignored the long-standing problem of pyramiding in gross receipts taxes. (Pyramiding is a tax on a tax when it’s part of the business’s gross income.) Supporters removed some of the more objectionable pieces of HB 547 but not all.

Two days before the session ended, the governor made her reservations clear: “House Bill 547 would reduce the state’s recurring revenue by a billion dollars every single year – that's a full tenth of the entire state budget. That’s on top of the $500 million in broad-based, recurring tax relief that we’ve worked with the Legislature to implement over the last four years.

“Put simply: this tax package cuts too deep, too quickly.”

At the time, James O’Neill (former director of state tax policy) and John Tysseling, both of the New Mexico Chamber of Commerce Tax Policy Committee, wrote in an op ed: “The proposed House ‘omnibus tax bill’ squanders a unique opportunity for meaningful Gross Receipts Tax reform in favor of short-term tax giveaways that will not help grow our economy. The fiscal revenue surplus currently available can significantly address long-standing tax policy issues that make New Mexico’s economy less competitive for investment and growth.”

Next the respected John Arthur Smith, long-time former Chair of the Senate Finance Committee, and John Bingaman, the governor’s former adviser, published an op ed. While the changes “might be doable this year, it frankly won’t be when oil and gas revenues decline,” the two wrote, because of New Mexico’s continuing reliance on the industry.

The package “includes many laudable policies when evaluated individually… but taken together, they present the state with a recurring price tag that is not worth the risk.” The governor, they said, must carve it down to a more reasonable size, and that’s what she did.

On Friday, the governor signed a bill that’s a shadow of its former self. It will still provide rebate checks of $500 for individual taxpayers and $1,000 for married couples, as well as a child income tax credit of up to $600 per child.

It will not reduce or raise personal income tax rates or increase alcohol taxes. It will not provide tax credits for electric vehicles, geothermal development, energy storage systems or rural healthcare practitioners. It will not reduce gross receipts taxes.

Looking for politics? HB 547 was mostly the creation of progressives, but moderates – the governor, Smith and Bingaman – tightened the reins.

“We can and should consider permanent and meaningful tax reform, but it must be accomplished in a fiscally responsible manner that will not jeopardize the state’s future,” the governor said.

That will require more work than we saw in HB 547 and could begin between sessions, with proposals, vetting and hearings before the interim Revenue Stabilization and Tax Policy Committee. With more time and more thought, we might get genuine tax reform and a realistic package.


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