The New Mexico House of Representatives approved a sweeping tax reform bill late Friday night that would generate at least $320 million more each year for the state’s general fund.
Republican lawmakers critical of the move called it one of the biggest tax increases in New Mexico history.
The bill, approved on a vote of 40-25 after nearly three hours of debate, also would bring in $37 million per year in additional funding for state and local roadways.
Not surprisingly, the vote fell mostly along party lines, with two conservative Democrats joining Republicans to oppose the bill — which, some lawmakers said, will financially hurt the average New Mexican.
Among other measures, House Bill 6 would implement a tax on all online sales, increase the tax on cigarette sales by 10 cents per cigarette, repeal a state law that allows New Mexicans to deduct half of their capital gains income on their personal income tax forms and increase the motor vehicle excise tax to 4.2 percent from 3 percent.
The bill, which now goes to the Senate for consideration, also would broaden income tax brackets and increase the top personal income tax rate from 4.9 percent to 6.5 percent, among other measures.
Rep. Javier Martinez of Albuquerque, one of five Democrats who sponsored the measure, said HB 6 will provide economic reform to a state that often relies on one source — the oil and gas industry — for revenues.
The tax increases would not severely impact most New Mexicans, Martinez said. For example, he said, a single person earning $45,000 a year would pay only about $11 more annually in taxes.
And, he said, the tax bill will allow the state to continue to invest more money in its public education system, now rated as one of the worst in the country in most national studies on the issue.
As the lengthy but civil discussion on the bill played out Friday night, it was clear the specter of a 2018 state District Court ruling against the state in an education lawsuit hung over the proceedings.
District Judge Sarah Singleton of Santa Fe decided in the case that New Mexico has shortchanged several groups of at-risk students by failing to provide an adequate education, and that it must invest more money in its public schools. Among the students cited in the ruling as requiring heavier investments are those learning English as a second language, special-needs students, low-income kids and Native American children.
Singleton has given state leaders until April 15 to submit a plan to remedy the problem. She did not attach a price tag, but lawmakers and Gov. Michelle Lujan Grisham, a Democrat, are proposing another $400 million to $500 million for the public education system in response.
Martinez said the lawsuit is “certainly part of what’s driving our efforts at economic reform.”
Both Democrats and Republicans brought up the lawsuit and the state’s public education system as they argued over various elements of the tax reform bill, with several Republicans saying the state should appeal Singleton’s decision.
Rep. Rod Montoya, R-Farmington, said the governor’s proposed “moonshot” for public education is just a fancy name for “let’s raise taxes.”
Republicans also were not so easily swayed by Martinez’s assertion that most New Mexicans won’t feel the effects of the tax bill. No matter how you look at it, they said, people in the state are going to have to pay more in taxes if the bill becomes law.
“New Mexico families are gonna be having more taken out of their wallet,” said Rep. Jason Harper, R-Albuquerque.
Several Republican lawmakers said the state should curb spending and build up its cash reserves instead of raising taxes.
“The only reason we are raising taxes is because we don’t want to live within our means,” Montoya said. “The only way for us to spend more money is to tax our citizenry, and right now, during this time of plenty, I don’t believe the citizenry is going to just take it.”
Lujan Grisham’s predecessor, Republican Gov. Susana Martinez, long vowed never to raise taxes and vetoed several bills proposing them over the past few years.
As the time to vote came to a close, many Republicans on the House floor held up signs that read “No.”