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In a bipartisan vote, a Senate committee on Thursday night approved an omnibus tax bill that would exempt most seniors from New Mexico income tax on Social Security benefits and reduce the rate of taxation of gross receipts at one-fourth percent.
As the bill still faces further hurdles in the final days of the legislative session, the 9-1 vote by the Senate Tax, Business and Transportation Committee marked a major victory for Governor Michelle Lujan Grisham. , whose legislative priorities include exempting Social Security benefits from state personal income tax and reducing the gross receipts tax rate.
“The governor is committed to putting more money back in the pockets of New Mexicans, and we’re happy to see his priorities moving forward,” Nora Meyers Sackett, Lujan Grisham’s publicist, wrote in an email. after the vote.
The bill would also extend the sunset on the state’s new solar market development income tax credit for eight years and increase the cap from $8 million to $12 million.
“This is an important package of tax changes and incentives, and combined they will help the economy, the environment and help reduce the tax burden on our residents and businesses,” said Jon Clark, Secretary deputy of the New Mexico Department of Economic Development. .
Tax and Revenue Secretary Stephanie Schardin Clarke said New Mexico is one of only 12 states to tax Social Security income, and the proposed reduction in the gross receipts tax rate from the state, at 4.875% versus 5.125%, would be the first in 40 years.
“By reducing the gross receipts tax by a quarter of a percent and eliminating the Social Security tax for low- and moderate-income New Mexicans, this bill provides significant and lasting tax relief to all New Mexicans,” Schardin Clarke said in an interview.
People with incomes under $100,000 and married couples filing jointly with incomes under $150,000 would be exempt from Social Security income tax under the proposed legislation.
The committee wrestled with a provision to add a five-year moratorium on the power of local governments to raise their tax rates on gross receipts, effectively reversing the reduction proposed by the state.
“When you tie our cities’ hands and tell them they can’t raise taxes, that’s very damaging, and it’s going to create major problems over the next few years if this bill passes in its current form. current situation,” said Senator Gay Kernan. , R-Hobbs. “Every community is different. Each municipality is different. There are needs that we cannot anticipate at this stage.
The committee ultimately removed the provision from the bill amid backlash from some lawmakers and city and county government officials.
“Yes [Senate Majority Leader Peter Wirth, D-Santa Fe] vote for tonight, he probably saves his marriage,” Sen. Ron Griggs, R-Alamogordo, joked of Wirth, whose wife, Carol Romero-Wirth, is a Santa Fe city councilman.
The Social Security income tax exemption would cost the state about $84.1 million per year, and the gross receipts tax cut would cost $190 million per year.
The average person in New Mexico would save $95 a year from the gross receipts tax cut, Schardin Clarke said.
When asked if the savings would make a difference in the lives of New Mexicans, Schardin Clarke said yes.
“I really think it will, especially for low-income people who really have to spend all their income on necessities,” she said. “This tax relief is going to stretch their salary even further, and I think that’s going to make a big difference.”
The tax package will then be examined by the Senate Finance Committee.
