SANTA FE, NM (AP) — The Legislature’s chief budget negotiator wants New Mexico lawmakers to consider dramatically reducing personal income tax rates — or eliminating the tax.
Democratic State Rep. Patricia Lundstrom of Gallup made the proposal in a bulletin this week distributed by the Legislature’s Office of Budget and Accountability. The House is due to be elected in November before its next regulatory legislative session in 2023.
Lundstrom is chair of the Legislature’s Main Estimates drafting committee and notes that the state government receives nearly $2 billion a year in personal income taxes, nearly a quarter of annual obligations. expenditure from the general fund.
“The idea of reducing or eliminating personal income tax is not without its challenges,” Lundstrom said. “The state cannot eliminate the tax without recovering at least some of the revenue elsewhere.”
Personal income tax is a rapidly growing source of revenue for the state, propelled by a recently increased top rate of 5.9% on higher incomes. Rates start at 1.7% for low-income residents.
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The proposal has raised concern among Democrats that New Mexico’s overall tax burden could shift toward low-income residents, amid increased reliance on revenue from the oil and natural gas industry.
This year, lawmakers have increased spending, cut taxes and approved payments of up to $1,500 per household to offset rising consumer prices, amid a fiscal windfall in federal pandemic relief and revenues linked to record oil production.
“We have record revenues, but that also means those are still coming from oil and gas,” State Representative Andrea Romero of Santa Fe said Thursday. “We’re in a boom cycle right now. But what follows the boom? It’s inevitable. … We have to be really smart.
The tax relief includes a slight reduction in gross receipts taxes on sales and business transactions and the elimination of Social Security income taxes for retirees earning less than $100,000 or households earning less than $150. 000 dollars. General fund spending increases by $1 billion, or 14%, for the fiscal year beginning July 1.
Lundstrom lists several states in the southeastern United States that have recently proposed or enacted personal income tax rate reductions. She said New Mexico has “sufficient” financial reserves to keep state spending stable.
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