A state senator who three years ago sponsored a sweeping tax-cut package pushed by Gov. Susana Martinez has introduced legislation to delay key parts of the package, including scheduled reductions in the state’s corporate income tax.
But Senate Finance Committee Chairman John Arthur Smith, D-Deming, said Tuesday that he introduced Senate Bill 252 as a “backup” in case the state’s revenue picture takes another turn for the worse. He said he won’t push for any committee hearings on the bill unless revenue projections indeed go down again later in the session.
“We’re not certain that the $30 million in new dollars is a reliable number,” Smith told a reporter. The bill, he said, is “sort of an option” in case falling oil and gas prices once again cause revenue projections to go down.
Last week, state financial analysts cut revenue expectations for next year by more than $200 million. This left the Legislature only about $30 million in new money to increase spending above this year’s $6.3 billion budget.
“We have a strong belief by a few members who are familiar with oil and gas that we’re $70 million to $90 million too strong in that number,” Smith said.
Smith says SB 252 would bring in an extra $24 million to $25 million. “But that might not be enough to plug the hole,” he said. “We’re plugging a lot of the holes with non-reoccurring [revenue],” the senator said. “And that bothers me for next year.”
The bill, introduced Monday, would delay for two years the corporate tax cuts, which only affect corporations with taxable income of more than $1 million.
Currently, the rate is $56,000 plus 6.9 percent in excess of $1 million. The rate is set to drop this year to 6.6 percent.
The bill also would delay for two years implementing the “single sales factor” for manufacturers in the state. This part of the tax code allows companies to be taxed only on sales to customers in New Mexico. In the current law, the rate is scheduled to go down each year until 2018.
“I don’t perceive that as a tax increase,” Smith said. “It’s just a delay in reduction.”
Senate Majority Leader Michael Sanchez, D-Belen, said Monday he hasn’t taken a deep look at SB 252, but he thinks a delay in implementing the corporate tax might be necessary if updated revenue projections show the state in the red. “If it keeps us afloat, we’re going to have to do what we have to do,” he said in an interview Tuesday.
In the final hour of the 2013 session, Smith introduced the legislation that became the tax bill by way of amending on the Senate floor a far less comprehensive tax bill. In addition to the corporate tax cuts and the single-sales provision, Smith’s version included an increase in film and television production credits and a combined reporting formula for taxation so big-box retailers have to pay taxes to New Mexico for out-of-state activities. It passed the Senate then went back to the House, where it cleared in literally the last seconds of the session.
Martinez and others touted the bill as a key to making the state more business friendly, which would lead to more jobs. The governor frequently touted the bill in her successful 2014 re-election campaign. Critics, however, point to the fact that job growth here has remained sluggish and that the state’s unemployment rate is the highest in the nation.