When legislators pass an omnibus bill, the word “omnibus” suggests that there is something for everyone.
The omnibus tax bill that recently passed the House covers a lot of ground, but it skirted a bill from the governor and the Republicans’ resident tax expert, Rep. Jason Harper (R-Rio Rancho). And that left state enterprises on the road.
The 69-page House Bill 547 would provide:
· Rebate checks of $500 for individuals and $1,000 for married couples.
· Reductions in personal income tax rates.
· Tax credits for rural health practitioners (doctors, dentists, podiatrists, pharmacists, dental hygienists, nurses and midwives and others).
· A child income tax credit of up to $600 per child.
· A refundable tax credit for electric vehicles of $2,500 on each purchase of an electric vehicle or $4,000 for low-income households.
· A reduction in gross receipts tax from 5% to 4.5% this year and 4.375% next year.
An extension of the Military Retirement Allowance waiver until 2031.
· A tax credit for adding energy storage systems to existing solar panels.
The New Mexico Chamber of Commerce (NMCC) and other business groups opposed HB 547 for a number of reasons.
The bill discourages investment by reducing the capital gains deduction. Although Democrats say this tax break benefits the highest earners in the state, they would be surprised how many middle-class people own stocks.
HB 547 creates a flat corporate income tax rate, which will shift most corporate taxpayers to a higher rate, according to legislative analysis. And it adopts the single selling factor to distribute corporate taxes among all companies. While this puts most companies on a level playing field, it would have an uneven impact, according to the analysis, and increase liability for domestic and international companies with a moderate physical presence while providing substantial tax deductions for companies with a lot of goods and a large payroll. (The idea is to incentivize multi-state businesses to expand into New Mexico.)
Tax committee Democrats say the package will help low- and middle-income New Mexicans. House Speaker Javier Martínez (D-Albuquerque) said of the gross receipts tax cut, “I think it’s very good for business.”
I wonder if he spoke to business people. He and other House Tax and Revenue Committee Dems certainly did not listen to the testimony of business groups. The bill passed the committee on a 9-5, party-line vote. He passed the House 50-18 with seven Republicans crossing.
“The bill is the result of committee members’ decisions on tax proposals introduced during the session,” the NMCC wrote. “We are disappointed that in a year of historic surpluses, our lawmakers are proposing tax increases in several areas.”
The biggest complaint is that HB 547 did not touch the tax pyramid. This is when taxes paid on goods and services are again taxed as part of a company’s total gross receipts. It’s a long-standing trade complaint and the subject of Harper’s HB 367. Despite the governor’s support, this bill has faced headwinds due to its impact on local governments. The Albuquerque Journal castigated them for their greed, but cities and counties have legitimate concerns about how they will pay for streets, water and cops.
With only a few days left in the session at the time of this writing, there is little time left to get the big tax bill, HB 547, to the finish line. If he survives, he will see changes in the Senate.
During the interim, Harper is expected to work on the tax pyramid with local communities and state business groups on a bill they can both support.
The opinions expressed in this column are those of the author.
