Legislators on Monday advanced a package of state tax changes aimed at providing financial relief to New Mexico families with young children, residents of low or modest incomes and military veterans.
The package also includes incentives aimed a reducing climate-warming pollution by offering refundable tax credits to residents who purchase electric vehicles and install related car-charging equipment, along with home-energy storage system.
A legislative panel advanced the bill on a 9-4 vote toward a likely House vote. The Democratic-led Legislature has until noon on March 18 to send bills to the governor.
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Democratic state Rep. Derrick Lente of Sandia Pueblo, lead sponsor of the proposed tax changes, said the goal is to put more money in the pockets of working parents, retirees and veterans while bolstering small businesses and supporting climate goals.
“We focus on what I think is important to the state: progressivity in our taxes, reforms to personal income tax rates to lower taxes to low- and middle income filers, while ensuring those at the top of the income scale pay their fair share,” Lente said.
Notably, the child income tax credit would increase to as much as $600, from $175, per child for families with lower incomes. Per-child credits would taper to $400 and $200 for families with higher earnings.
The entire package would cost the state more than $500 million in forgone government income. It still leaves room for direct individual tax rebates of $300, or $600 per couple, at a cost to the state of more than $400 million, Lente told the legislative panel.
The bill would overhaul income tax brackets with lower rates for some demographics and higher rates for top earners — as high as 6.9% for individuals making more than $250,000 annually.
The state’s portion of the gross receipts tax on sales and services would decline by half a percentage point, settling at about 4.4% by July of 2024. Combined state and local gross receipts tax rates currently range from about 6% to 8.5% across the state, depending on location.
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The bill would increase liquor excise taxes, with exceptions for small breweries and wineries, to provide more money for programs to treat alcohol dependency and prevent drunken driving. It would also eliminate a tax exemption for cigars, and extend income tax exemptions for military veterans on retirement pay above $30,000 through 2031.
The state would provide a $2,500 refundable personal income tax credit toward the purchase of an electric vehicle — or up to to $4,000 for low-income residents, with an additional $300 credit for car-charging equipment and installation. Eligible vehicles can’t cost more than $55,000.
The proposal also is designed to increase tax collections on capital gains from income on investments.
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Albuquerque Chamber of Commerce CEO Terri Cole urged legislators to reject the bundled tax changes, arguing that even selective rate increases are unnecessary amid a multibillion-dollar budget surplus.
“For businesses, this is a disappointing tax package,” she said.
Democratic Sen. George Muñoz of Gallup said he favors cash rebates that are focused on people with fixed incomes and the poor, fearing universal rebates will lead to mark-ups on retail prices as rebate checks and transfers go out.
“It drives inflation up,” he said.