In the waning hours of the 2013 New Mexico legislative session a compromise was achieved on certain tax policies that received a good deal of attention. The compromise does include one of Gov. Martinez’s top priorities (cutting the corporate income tax albeit from 7.6 percent to 5.9 percent over five years rather than going to 4.9 percent.
If that were the sum total of the legislation, we at RGF would be cheering the business-friendly change, but alas, that is only one part of the bill.
Additionally, the proposal revives the so-called “Breaking Bad” bill which we trashed recently. Again, the big hangup is that the proposal essentially expands the pool of money available for subsidies by carrying unused subsidy money (annual subsidies are up to $50 million) over from year-to-year. But this is not the worst part…
The worst aspect of the bill is that over time it eliminates “hold harmless” distributions to cities and counties over 15 years. Worse, it limits flexibility of local governments to apply those taxes to food or medical services. This is a gross receipts tax hike in waiting for New Mexico taxpayers.
Other provisions in the bill include a tightening of existing tax breaks such as the high wage tax credit (not a bad thing in exchange for lower taxes); allowing a single sales factor (a good thing), and mandatory combined reporting for “big-box” stores (not a good thing).
So, is this a good compromise? I think it is good enough to sign, but it is hardly the sort of “game-changing” reform that will make New Mexico a more business-friendly state. Were I the Governor, I’d probably sign the bill, but wouldn’t “take ownership” of this half-baked plan.