- Associated Press - Tuesday, March 12, 2019

SANTA FE, N.M. (AP) - A House-approved proposal to raise New Mexico’s personal income tax rates was challenged Tuesday by a Democratic senator, raising doubts about the Legislature’s appetite for tax increases amid a budget windfall from oil and natural gas production.

During a committee review of the tax initiative, Sen. Clemente Sanchez of Grants sought amendments that would eliminate income tax increases that mostly targeted upper-income residents and reduce several other proposed tax hikes. An hourslong discussion ensued with decisions postponed until Wednesday.

Sanchez says the state’s budget surplus makes it hard to rationalize a major tax hike, breaking with Democratic colleagues who say significant new sources of state income are needed to ensure sustained funding for higher teacher salaries and roadways. Republican lawmakers say the proposed tax increases are counterproductive for a state trying to attract businesses.

A proposed state budget would increase annual general fund spending by $700 million for the year beginning July 1, with raises for all public school staffs and state employees. Leading lawmaker also want to spend over $1 billion on road and infrastructure projects, drawing on budget surpluses of more than $1 billion for both the current fiscal year and the year that begins July 1.

The surplus has been traced largely to booming oil and gas production. State economists warn the surplus could quickly become a deficit if world energy markets falter.



The House bill from Democratic Reps. Javier Martinez of Albuquerque and Jim Trujillo of Santa Fe as currently written would increase annual state income tax collections by an estimated $130 million, with the rate on individuals earning $200,000 or more rising from 4.9 to 6.5 percent.

It also would provide a larger tax credit for families with children to offset recent federal tax changes, impose higher vehicle-sales taxes and add new taxes on online sales, e-cigarettes and nonprofit hospitals.

Proposed amendments from Sanchez not only drop the income tax increases but also shrink the proposed tax increases on tobacco products and cars. Instead of raising an additional $330,000 in the first year, the state would increase annual state tax increases by a little less than $100,000.

“We might as well not do anything,” Trujillo said. “We’re not going to where I think we should be going - a more stable revenue source.”

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