House and Senate approve compromise on massive tax reform bill with rebates
Mar. 18—The Legislature came to an agreement early Saturday on a broad omnibus tax package that had spurred more than 24 hours of negotiations between House and Senate teams as the 60-day session was coming to an end.
House Bill 547 was approved with rebate checks for all New Mexico taxpayers — $500 for individual filers and $1,000 for married couples filing jointly.
The Senate voted 33-9 to approve a joint committee report on the the bill around 1 a.m. Saturday.
Around 9:20 a.m., the House of Representatives also voted to approve the measure, based on calls of "yea" or "nay."
Lawmakers have been talking for years about revising the state's complex tax code, and over the past year, they gathered during interim legislative committee hearings to discuss proposals.
Yet in the final days and hours of the session, the two chambers remained divided on how best to approach the issue.
The differences led to a series of public conference committee meetings as the chambers strove to reach an agreement on issues such as a gross receipts tax decrease, personal income tax brackets and breaks, and tax credits for the film industry.
The Senate had heavily amended the original House bill first introduced about 10 days ago by Rep. Derrick Lente, D-Sandia Pueblo. The final package included modified versions of some of the initiatives he proposed.
In introducing the final bill on the House floor shortly after 8 a.m. Saturday, Lente said everyone involved in shaping it "condensed ... thousands of pages that is this document of 69 pages worth of tax reform."
The following provisions are included in the approved bill:
* A gross receipts tax reduction by 0.5% over a four-year period, in increments of 0.125% each year.
* An increase of $5 million per year on film production tax credits over the next 10 years. (The Senate proposed an increase of $10 million per year for 10 years.)
* A change in capital gains taxes allowing filers to deduct 40% of capital gains income up to $1 million in income from the sale of a business. (The Senate had proposed a 20% income deduction.)
* Tobacco tax increases — $2 per pack — and a 25% increases on cigar purchases.
* An across-the-board 20% increase in alcohol excise taxes effective Jan. 1, 2024. The majority of the funds raised by this increase will go to local DWI grant funds, a drug court fund and other substance-use harm reduction programs. (The Senate proposal was more complicated but would have raised more money and funneled some of the revenue into the state's general fund.)
Lente said the alcohol excise tax increase might be considered minimal, but it is the first alcohol tax increase in about 30 years.
The cost of the tax package to state coffers will rise over the next few years to about $1.3 billion in 2027. The tax rebates alone will cost $666 million this year, Lente said.
Rep. Patty Lundstrom, D-Gallup, criticized the bill as too costly for the state, though she said she would support it.
Rep. Christine Chandler, D-Los Alamos, said she was disappointed the House did not stick with its original proposal to make a 0.5% gross receipts tax cut immediately, rather than over the course of four years.
Rep. Joanne Ferrary, D-Las Cruces, had harsher criticism. "This is not a good package," she said, arguing the Senate had a better proposal when it came to raising alcohol and tobacco excise taxes.
Republican Rep. Jason Harper of Rio Rancho, who played a major role in drafting the compromise bill, said tax measures are rarely supported 100% by anyone, let alone everyone.
Rep. Stefani Lord, a Republican from Sandia Park, agreed. "I think everyone's equally unhappy," she said.
Lente said House leaders wanted to tackle the tax proposal on the floor during the light of day — "when the sun was shining" — but he did not criticize the Senate for acting on the initiative in the early morning hours.
Senate leaders did that to offset the possibility of a filibuster that could have derailed the process, he said.
During a Senate floor debate on the tax bill late Wednesday night, Sen. Bill Sharer, R-Farmington, argued for more than an hour there was little relief for New Mexicans in the measure.
In a sometimes-rambling monologue, Sharer — who had held a one-man filibuster that killed a voting rights bill in the waning hours of the 2022 legislative session — chastised the Senate for debating the measure at night and referenced tax policies from the days of Stephen Watts Kearny in 1840s Santa Fe.