Senate takes mediocre House-passed tax omnibus bill & makes it worse

With just 48 hours or so left in the legislative session, the majority Democrats just can’t seem to settle on a final tax package. The bill (HB 547) which started off terrible as introduced in the House, was improved significantly before being voted on in the full House, has now passed the Senate after several amendments that will make the bill significantly worse.

Here are the lowlights (just the changes). You can find our discussion of the House-passed bill here.

1. The Senate-passed bill adds EVEN MORE GENEROUS film subsidies on top of those New Mexico already pays out. New Mexico taxpayers could pick up the tab for as much as 40% of the cost of certain films. The bill also nearly doubles the overall cap on film subsidies from $110,000,000 annually to $210,000,000.
2. Alcohol taxes will go up by 5 cents per drink and more of the money collected (relative to the House-passed bill) will go to the general fund as opposed to alcohol treatment programs.

While these changes are bad and make the Senate bill an overall negative in our Freedom Index, in reality, the worst part of the bill as passed by both houses is the increases in capital gains taxes. Current law allows a 40% deduction. This bill takes all of that away except for $2,500. The only exception is the sale of a business that would net 40% deduction if the value is $300,000 or less. Republicans have pushed for removal, but Democrats seem unwilling to remove from the bill.

The House-passed version of HB 547 was a +1. The Senate version is -2. The Senate version now heads back to the House for concurrence. We’ll see if they buy what the Senate is selling or not. Also, Gov. Lujan Grisham should carefully consider how many tax hikes she wants to sign with a $3.6 billion surplus.