Committee tables GOP tax reform bill

May 25--A legislative committee on Thursday morning shot down a proposal for a sweeping overhaul of New Mexico's gross receipts tax, tabling a bill Republican Gov. Susana Martinez had touted as a priority and leaving intact a long list of exemptions.

The House Labor and Economic Development Committee voted 6-5 along party lines against the tax reform proposal. Democrats argued it would be unwise to rush through a complex tax bill during a special session dedicated to financial solvency and funding the state's higher education system.

Sponsored by Rep. Jason Harper, R-Río Rancho, the 430-page bill would have ended most credits and deductions in the state's gross receipts tax. Harper said the bill would have allowed the state to lower its overall gross receipts tax rate and simplify the tax system.

"If you don't have one of these deductions, you're paying more than your fair share of tax," he told the committee.

Harper said the bill would have lowered the state gross receipts tax from approximately 4.2 percent to 3.6 percent next year while raising certain taxes, such as the levies on health care and car sales.

But critics countered it could cost the state too much in revenue at a time when New Mexico government is already strapped for cash.

An incongruous group of lobbyists lined up to speak against the measure.

Representatives of labor unions and liberal advocacy groups argued it would shift a bigger share of the tax burden onto the poor.

"We don't want to have a more regressive tax structure," said Carter Bundy of the American Federation of State, County and Municipal Employees.

A representative of the health insurance industry said the bill would raise the tax on premiums to the highest in the country.

And officials from charities including the American Cancer Society raised concerns about ending a tax exemption for nonprofit groups.

Harper's bill would have left some exemptions in place, undermining the idea of simplifying the tax code to keep government out of the business of picking beneficiaries of tax breaks.

"The bill would offer both benefits and drawbacks for economic development in the state," the Legislative Finance Committee staff wrote in its analysis of the bill. "Some companies are attracted to simple tax code systems and lower overall rates. However, some business incentives are repealed by the bill either immediately or in the future, so some companies that might have located in New Mexico and been able to largely avoid paying GRT would now be subject to the tax, albeit at a lower rate."

The analysis was only preliminary, explaining that the bill's effects were uncertain.

The governor has said she will not approve other revenue measures, such as those approved Wednesday by the Legislature, without comprehensive tax reform. But without those increases in taxes, the state could end up without a balanced budget during the fiscal year that begins in July.

Harper filed the bill on Wednesday and leading lawmakers said they had not seen it previously.

Top Democrats argued it would be unwise to rush the bill in a special session that had only been expected to last a few days.

But Republicans said the House passed a similar, bipartisan bill without opposition earlier this year and that most of the 430 pages were simple changes in the current tax code's wording. But legislative staffers wrote in a financial analysis that the bill is, in some ways, significantly different, from Harper's last proposal.

Despite the opposition, lawmakers and critics of the bill roundly praised Harper for taking on the issue. And the debate has spurred calls for further study of tax reform.

Nonetheless, Harper said he would recommend the governor not accept any tax increases without broader reform.

"My advice to the governor," he told reporters after the committee's vote, "would be to veto all the standalone tax increases."

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