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House-approved bill ups direct payments and eliminates tax hike for top NM earners

Lente Tax House floor 031223.png
New Mexico Legislature
Derrick Lente (D- Sandia Pueblo) introduces an amendment to the tax package the tax committee he chairs approved last week. He said the changes were a result of feedback from the public and lawmakers on the amount of a rebate for all taxpayers and an income tax hike for those with the highest wages. The rebates were increased and new upper tax brackets were scrapped in a version of the bill that passed the House on Sunday, March 12, 2023.

A tax reform package got the go-ahead from the New Mexico House late Sunday with a few substantial changes. The amended bill increases the amount all taxpayers will get in direct payments and nixes a proposed tax hike for New Mexicans who make the most.

The massive tax package unveiled last week included the tax rebates for all New Mexicans backed by Gov. Michelle Lujan Grisham, but had diminished them substantially.

Bill sponsor and Tax and Revenue Committee Chair Rep. Derrick Lente (D-Sandia Pueblo) said reducing the payments from $750 to $300 for individuals, and double that for joint filers, left room in the budget to make more lasting changes to the tax code. However, he said many weren’t happy with that decision.

“We heard the public, we heard members of this body and in the Senate to say, ‘Well, we should give some money back to the hard working people of New Mexico,’” he said as he introduced an amendment, noting the state is working with record revenues.

He proposed a middle ground where individuals will get $500 and married couples, $1,000, which the House approved.

The initial bill, while cutting income taxes for residents with lower and middle incomes, also raised the rates for two new upper brackets. Joint filers making more than $200,000 would have gone from a 4.9% to 6.5% rate, and families bringing in more than $500,000 per year would have seen their rate go from 5.9% to 6.9%.

“And we were met with tons of criticism, to be frank,” Lente told his fellow Representatives.

The proposal now maintains the state’s existing top tax bracket, which includes wages of more than $315,000 annually. It also splits New Mexico’s large middle-income bracket — which currently includes those earning $25,001 to $315,000 per year — into two, creating a more progressive structure. Meanwhile, it decreases the rate for the lower three brackets. While those who make the least would still see the biggest benefit from the income tax changes, everyone would pay less under the amended bill.

Ranking member of the House tax committee Rep. Jason Harper (R- Rio Rancho) voted against the bill in committee. He told his colleagues on the House floor that his main opposition had been to the two higher income tax brackets.

“Those new brackets were a tax increase not just on high-wage earners, but on doctors and small businesses,” he said. “I just felt like, as our small business are trying to climb out of COVID, when we’re trying to do things that don’t chase doctors away, I just didn’t think that was right.”

Harper joined a handful of other Republicans in supporting the amended version of the bill Sunday.

The package of tax reforms also lowers the gross receipts tax and capital gains deduction while increasing the child tax credit and raising excise taxes on alcohol and certain tobacco products.

Lente said lowering the tax burden for upper-income New Mexicans added nearly $70 million to the proposal’s price tag. He said the tax package would now have a $128 million overall impact on the state budget.

The measure heads to the Senate for likely changes after passing the House on a 50-18 bipartisan vote with only Republican lawmakers in opposition. The Legislature adjourns at noon on Saturday, March 18.

Nash Jones (they/them) is a general assignment reporter in the KUNM newsroom and the local host of NPR's All Things Considered (weekdays on KUNM, 5-7 p.m. MT). You can reach them at nashjones@kunm.org or on Twitter @nashjonesradio.
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  • The House Taxation and Revenue committee has been hearing tax proposals for 48 days and, on Monday, it passed a bill that compiles around 20 of them into a comprehensive package. It includes a significant reduction of direct payments called for by the governor in order to make room for other reforms.
  • Significant tax reforms are expected to move through the Roundhouse this year with bipartisan support. Bill Jordan with New Mexico Voices for Children is calling for lawmakers to create a more equitable tax code — not only with an eye towards income levels, but race and gender as well.
  • The expansion of the federal child tax credit in 2021 made a dent in how many U.S. children are living in poverty, but it ended after just one year. New Mexico, a state with the second highest child poverty rate in the country, quickly passed its own version of the tax relief for people with children last year. While parents won’t see the benefits of the state credit until they file taxes next year, lawmakers are already debating whether to increase it.