House-passed tax bill is MUCH better, remains a missed opportunity

The omnibus tax bill (HB 547) passed over the weekend. It is no longer the disaster it was when introduced. In fact, it has moved from “-8” to “+1” in our Freedom Index vote tracking.  Because of its complexity and numerous pluses and minuses, it is a very difficult bill to rate and for members to vote on. Hopefully the bill is improved in the Senate, but as it stands it remains a missed opportunity.

The good:

1. The bill cuts gross receipts tax rates significantly;
2. It reduces personal income tax rates at lower income levels (which earners at all levels will benefit from somewhat);
3. Social security tax cuts from 2022 are indexed to inflation;
4. Military pension tax reduction is extended for another 5 years;
5. Motor vehicle excise taxes would be directed to roads and more alcohol taxes would be allocated to alcohol treatment.,

The bad:

1. The unprecedented $3.6 billion surplus SHOULD have been an opportunity to end New Mexico’s tax pyramiding on business services. This was not done.  Until it is New Mexico’s economy will continue to suffer.
2. Numerous subsidies are tucked in the bill for EV’s, charging stations, and energy storage projects.
3. Corporate income taxes are increased slightly (by removing a lower 4.8% rate on small corporations and taxing them all at 5.9%;
4. Capital gains taxes are increased due to a less generous exemption;
5. Alcohol taxes and taxes on cigars are increased.

Overall, the bill remains a mess of conflicting economic priorities. The only coherent strategy is that it attempts to remove taxes from those with lower incomes.