Why NM Legislators Should Vote for HB 6
Why NM Legislators Should Vote for HB 6
Committee: Taxation & Revenue
Summary: New Mexico is highly dependent on the oil and gas industry for revenues, an industry that is extremely volatile. Numerous tax credits, deductions, and exemptions have narrowed the tax base, requiring higher rates to maintain revenue levels. This bill takes a comprehensive approach to broadening the tax base and using the revenues to lower the Gross Receipts Tax (GRT) rate by 0.5%, reducing the state’s revenue volatility.
History: Nothing this comprehensive has been presented in recent years.
Why This Bill Is Good for NM:
- It’s a comprehensive approach to tax reform, rather than a single tax tweak.
- It broadens the tax base by taxing internet sales, implementing combined reporting for corporations, and eliminating nearly 30 tax expenditures, among other things.
- It lowers the Gross Receipts Tax rate by 0.5%.
- It replaces the existing personal income tax structure with a truly progressive tax structure, increasing the top rate to 6.5%. This higher rate will apply to incomes over $200,000 for single filers and $300,000 for married couples filing jointly.
- Currently, the effective tax rate for individuals earning $17,000 and below is 10.6% while the tax rate for those earning over $338K is 4.6%, less than half the rate paid by our lowest income New Mexicans (NM Voices for Children).
- It reduces revenue volatility for the state.
- Revenues will be adequate to fund needed government services, according to the Legislative Finance Committee.
How Has the Bill Been Improved
- The repeal of the capital gains deduction is back in… for now. It will likely be a fight to keep this in the bill as it moves, so please ensure that as you give comments on the bill--in committee and in one-on-one conversations with House and Senate members and the Gov’s team, you say that you want this tax break for the wealthy repealed, both to raise revenue and increase tax fairness.
- The Working Families Tax Credit has been doubled—we want to retain this level.
Overall Message to Retain Improvements and Push for Other Important Amendments
- It's time to change course so we can go big on New Mexico’s future.
- We need to make the tax system more fair for New Mexico’s working families.
- Greatly increased, stable and steady revenue is the only way New Mexico can invest in the education, health, public safety, and transportation that families and businesses need to succeed.
Why would we raise taxes when we have such a huge surplus? (We need to reform our revenue system so that we have money to invest in education during both boom and bust times.)
It’s time to change course. Oil and gas provide tremendous resources to our state. But we have to break the boom-and-bust cycle that we’re all too familiar with, with more stable sources of revenue to invest in families and long-term opportunities so we don't have to rely on just one industry.
Why now? (We’ve starved the programs that benefit kids and families the most for too many years, and our outcomes show it!)
Failed tax policies over the past 15 years have forced middle and working class families to shoulder all the burden. School funding is down dramatically, higher education funds cut by a third, 400 million cut from health care, and behavioral health services have been dismantled. It's time to change course.
What’s the appetite for new revenue? (There will never be a better or more necessary time to be bold on behalf of New Mexico’s families and invest big in their futures.)
It’s time to change course. We are ready to go big on New Mexico’s future, and we’re going to need increased, steady revenue to make it happen and break the boom-and-bust roller coaster we’ve been on. For our schools, public safety, transportation, infrastructure projects, and other critical services, New Mexico’s families can’t wait.
NEED FOR NEW REVENUE
- In order to make the investments necessary to improve our economy, New Mexico needs a more adequate and sustainable tax system.
- Major tax cuts over the past 15 years have made us too reliant on the revenue from oil and gas extraction. Prices for oil and natural gas are determined on the global market. When prices go down, production – and the revenue we receive from it – goes down too. While we’re fortunate to have this form of revenue, we can’t allow this boom-and-bust cycle to translate into a feast-or-famine cycle for the state budget. Our services and programs require reliable funding.
- The court recently ruled that the state is not providing an adequate education to its children. Fulfilling the court order will require significant additional revenue – and it must be reliable and recurring.
- The General Fund budget is $800 million lower now than it was ten years ago (adjusted for inflation). Our state agencies are so understaffed they are unable to fulfill their missions, we have a significant teacher shortage, and our economy is still sluggish. We cannot expect to have prosperity unless we make investments in our state and people.
Possible push-back: How can we raise revenue when we have such a huge surplus?
Rebuttal: The price of oil has been dropping, and may continue to drop, so we can’t rely on this revenue to be continuing. Our services and programs, on the other hand, require recurring revenue if we are to guard against having to make painful budget cuts during the next session.
Possible push-back: My constituents don’t want us to raise taxes.
Rebuttal: Recent polling shows that New Mexico voters want greater state investments in our classrooms and teacher pay, our mental health services, clean energy, and early childhood care and learning – but they understand that those all cost money. Recent polling also shows that voters strongly support increasing taxes on the top incomes and on out-of-state corporations.
Supporting Organizations: New Mexico Voices for Children