Last night the Senate passed the budget, HB2, on a 26-14 vote.  It will now move to the Governor’s desk for his consideration.

The House passed the Senate Finance substitute for Senate Bills 10, 12, 13 on a 38-28 vote and that bill will also now move to the Governor’s desk for his consideration.

Pending legislation to be considered by the Senate Finance Committee:
HB3: CIGARETTE TAX INCREASE & TRIBAL STAMP sponsored by Rep. G. Chasey. The bill increases the tax on a pack of cigarettes by $.75, and earmarks $.25 for Public Education.  The bill passed with a four-year sunset.  The Senate Finance Committee will debate that bill today.

HB6: SUPPLEMENTAL SEVERANCE TAX BONDS sponsored by Rep. J. Trujillo. This bill authorizes the State Board of Finance to issue short-term (or sponge bonds) to use to supplement the General Fund Revenue.

Moving to the Senate Floor for debate is:
HB5: SEVERANCE TAX BOND PROJECTS sponsored by Rep. J. Trujillo.

SB1: 2010 CAPITAL PROJECTS GO BOND ACT sponsored by Sen. C. Cisneros.

Last night the House passed the budget (HB2) on a 39-27 vote.  There was one amendment introduced by Rep. L. Varela that passed as well.  This amendment directs the State Personnel Office to review all unfunded positions and agency vacancies and eliminate 1,900 positions by July 1, 2010.

The budget, as amended, will now move to the Senate for consideration.

The House also passed on a 41-26 vote, HB3: CIGARETTE TAX INCREASE & TRIBAL STAMP sponsored by Rep. G. Chasey. The bill increases the tax on a pack of cigarettes by $.75, and earmarks $.25 for Public Education.  The bill passed with a four-year sunset.  The bill now moves to the Senate.

*Please note that we mistakenly reported that SB7, the Senate version of this bill, passed Senate Finance yesterday.  This bill did not pass.  The Senate will consider HB3 instead.

The Senate Finance substitute for Senate Bills 10, 12, 13 passed the Senate Floor on a 41-26 vote and will now move to the House.  This bill does the following with the revenue impact (tax increase) noted:

$60M:  Increase the GRT by 1/8%

$12M: Amends the compensating tax, to impose the tax on purchases that are not subject to the gross receipts tax only because the seller does not have nexus with the state.

$68M: Repeals the food deduction but creates a 5.25 percent credit for food so that only local tax rates will apply to food at an average tax rate of slightly over 2 percent. The state would discontinue that portion of local government hold harmless distributions that are attributable to local option taxes. However, the state would continue to make a separate hold harmless distribution to municipalities equal to 1.225 percent of food sales for which a tax credit is claimed.

$66M:  Requires personal income taxpayers who itemize their deductions to reduce the amount of itemized deductions for New Mexico purposes by the amount of state and local taxes included in the itemized deductions for federal purposes.

($5M):  Expands LICTOR to help the low income people hurt by the increase of the food tax.

Earlier today, we advised you of all the revenue proposals that had been introduced.  Tonight, the Senate Finance Committee passed a version of some of those that will now move to the Senate Floor and then to the House.  It appears that this package may be the compromise.

Senate Finance passed a substitute for SB10, SB12, SB13.  The substitute provisions and revenue estimates are as follows for a total of $201M:

$60M:  Increase the GRT by 1/8%

$12M: Amends the compensating tax, to impose the tax on purchases that are not subject to the gross receipts tax only because the seller does not have nexus with the state.

$68M: Repeals the food deduction but creates a 5.25 percent credit for food so that only local tax rates will apply to food at an average tax rate of slightly over 2 percent. The state would discontinue that portion of local government hold harmless distributions that are attributable to local option taxes. However, the state would continue to make a separate hold harmless distribution to municipalities equal to 1.225 percent of food sales for which a tax credit is claimed.

$66M:  Requires personal income taxpayers who itemize their deductions to reduce the amount of itemized deductions for New Mexico purposes by the amount of state and local taxes included in the itemized deductions for federal purposes.

($5M):  Expands LICTOR to help the low income people hurt by the increase of the food tax.

Senate Finance also passed:  SB7: INCREASE CIGARETTE TAX sponsored by Sen. B. Sanchez.  This bill would impose a $.50 tax on a pack of cigarettes.  This bill would generate about $25M bringing the total revenue to $226M.

This is combined with the $13M generated by the passage of HB120 during the regular session.  HB120: AMENDMENTS TO TAX WITHHOLDING introduced by Speaker Lujan is a 30-page bill that substantially reorganizes and refines tax withholding provisions. The bill requires employers of 50 or more employees but who are not required to file an unemployment insurance tax form to file a quarterly withholding information return to Taxation and Revenue Department. The bill requires New Mexico pass-through entities to withhold and remit on a quarterly basis from each nonresident owner’s interest. Substantial revisions to the bill were made to lessen the impact on business.

The 2010 Special Session is underway.  The budget has been introduced, HB2: General Appropriation Act of 2010.  The bill is very similar to the budget proposed in the regular 2010 session.  The budget has about $100 million in cuts. After cuts, the legislature will need to raise an additional $233 million.

The following bills have been introduced to generate the extra revenue. With the exception of one bill (HB3 which just passed the House Tax and Revenue Committee) proposals are being debated.

$33.1M
HB3/SB4: CIGARETTE TAX INCREASE & TRIBAL STAMP sponsored by Rep. G. Chasey & Sen. D. Feldman. Both bills propose to increase the tax on a pack of cigarettes by $.75.  HB3 was tabled on an 8-7 vote by the House Taxation and Revenue Committee on Monday. However, that bill passed today on a 10-6 vote with $.25 earmarked for education.

$100M
HB6: SUPPLEMENTAL SEVERANCE TAX BONDS sponsored by Rep. J. Trujillo. This bill authorizes the State Board of Finance to issue short-term (or sponge bonds) to use to supplement the General Fund Revenue.

$2M
SB2:TEMPORARY TAX AMNESTY PROGRAM sponsored by Sen. P. Griego. This bill authorizes the Taxation and Revenue Department, with the concurrence of the governor, to declare an amnesty period of no more than 180 days provided that that amnesty period shall occur within the fiscal year 2011.

$140M (based on FIR for SB10 from the Regular Session)
SB3: GROSS RECEIPTS "FOOD" DEFINITION sponsored by Sen. D. Feldman. Basically imposes the GRT on food considered junk food.

SB8: GROSS RECEIPTS "FOOD" DEFINITION sponsored by Sen. B. Sanchez.  This bill is similar to SB10 introduced in the regular session. The bill narrows the definition of food eligible for the GRT deduction to the food that is eligible for the WIC program.  However, the bill also exempts flour tortillas and fresh fish.

$35M (based on FIR for SB142 from the Regular Session)
SB5: LIQUOR EXCISE TAX RATE & DISTRIBUTION sponsored by Sen. B. Sanchez. This would increase liquor excise tax rates, as follows: on spirituous liquors, from $1.60 to $2.73 per liter; on beer (except that produced by microbreweries) from $0.41 to $0.94 per gallon; on beer produced by microbreweries, from $0.08 to $0.61 per gallon; on fortified wine, from $1.50 to $1.92 per liter; and on cider, from $0.41 to $0.94 per gallon.

$51M (based on FIR for SB122 from the Regular Session)
SB6: SURTAX ON HIGH-INCOME NEW MEXICO TAXPAYERS introduced by Sen. B. Sanchez would impose a surtax of one percent on taxable income in excess of $80,000 for married individuals filing separate returns; $160,000 for heads of household, surviving spouses and married individuals filing joint returns; or $100,000 for single individuals and for estates and trusts.

$23.8M
SB7: INCREASE CIGARETTE TAX sponsored by Sen. B. Sanchez.  This bill would impose a $.50 tax on a pack of cigarettes.

(figure unknown)
SB9: COMBINED TAX REPORTING & DISTRIBUTIONS introduced by Sen. P. Wirth. This bill requires almost all corporations operating in New Mexico that are members of a family of corporations engaging in a unitary business to file a combined return for New Mexico corporate income tax purpose.

$217M
SB12: FOOD TAX, GROSS RECEIPTS TAX, AND DISTRIBUTIONS sponsored by Sen. C. Cisneros. This bill would increase the state gross receipts and compensating tax rate to 5.25 percent. This bill also repeals the food deduction but creates a 5.25 percent credit for food so that only local tax rates will apply to food at an average tax rate of slightly over 2 percent. The state would discontinue that portion of local government hold harmless distributions that are attributable to local option taxes. However, the state would continue to make a separate hold harmless distribution to municipalities equal to 1.225 percent of food sales for which a tax credit is claimed. The rate of this distribution would decrease in FY12 to 1.05 percent. This bill also amends the compensating tax, to impose the tax on purchases that are not subject to the gross receipts tax only because the seller does not have nexus with the state.

$90M (based on FIR for HB270 from the Regular Session)
SB13: FEDERAL DEDUCTIONS AS STATE TAXABLE INCOME (also known as Tax on Taxes) sponsored by Sen. G. Ortiz y Pino.  This bill requires personal income taxpayers who itemize their deductions to reduce the amount of itemized deductions for New Mexico purposes by the amount of state and local taxes included in the itemized deductions for federal purposes.

$175M (based on the FIR for SB128 from the Regular Session)
SB15: INCOME TAX SURTAX & DISTRIBUTION sponsored by Sen. E. Griego. This bill would, for the 2010, 2011 and 2012 tax years, adds a 3.3 percent personal income tax surtax on married individuals filing separate returns with income over $75,000, on heads of household, surviving spouses and married individuals filing joint returns with income over $150,000 and on single individuals and estates with income over $100,000.

$118M (based on the FIR for SB236 from the Regular Session)
SB17: PHASE OUT FOOD TAX DEDUCTION sponsored by Sen. J. Smith. This bill phases out the gross receipts tax deduction for the sale of food at a retail store as follows:

• 75 percent deductible in FY11
• 50 percent deductible in FY12
• 25 percent deductible in FY13
• 0 percent deductible in FY14 and beyond