Corporate tax bill gets reprieve; sales tax chugs along

A long-simmering bill that would require multi-state corporations to pay income tax on their earnings in NM  lived another day as the House Business and Industry committee came to a close Thursday night. Rather than being tabled, as several other tax bills were, the combined reporting bill sponsored in the House by Rep. Ray Begaye, D-Shiprock, but long championed by Sen. Peter Wirth, D-Santa Fe, was given a reprieve until Tuesday. The committee also passed a bill that would increase New Mexico’s gross receipts tax by half cent, which is projected to raise $238 million.

Gross Receipts Tax

House Bill 119 would raise the gross receipts tax by a half a cent for three years, returning to the current 5 percent in fiscal year 2015. Sponsored by House Speaker Ben Lujan, it sailed through the committee with a few half-hearted protestations from members. Prior to hearing Lujan’s bill, the committee members tabled both an increase in cigarette taxes and a proposal to tax Internet sales. Raising the Gross Receipts Tax, however, garnered very little opposition from the Democrats on the committee.

“We have a responsibility to our citizens,” Lujan said. He and his colleagues were elected to do what’s right, not necessarily whats popular, he said.

Corporate taxes

The “combined reporting” legislation–HB 62 and SB 90–would require corporations that operate in multiple states to apportion the income their company makes as a whole using a formula to reflect the income they make in the state. Currently, such companies aren’t required to report the specific income they make in New Mexico for tax purposes.

The committee chair, Rep. Debbie Rodella, D-Española, told the bill’s sponsors–Sen. Peter Wirth and Rep. Ray Begaye–that she remembered in years past the argument against the bill that it wasn’t necessary due to the state being flush with cash.  But now, the state Legislature is embroiled in a great debate over how to close the biggest deficit anyone remembers in at least the last few decades. So rather than table the bill, she asked him to amend the bill to address the concerns that were brought up during the hearing, and bring it back Tuesday. It won’t be on the published list, she said, but the committee will hear it first thing.

Sen. Wirth quickly addressed an issue that had surfaced about other tax bills. He’d been listening to the discussion of the other bills all afternoon, Wirth said, and understood concerns that had been raised about earmarks in many of the revenue bills–including the combined reporting bill–that would allocate the new tax revenue to public education. Basically, the concern is that the public school funding formula shouldn’t rely on tax streams that are volatile. Wirth said he understood that and felt it would be reasonable to look at taking the earmarks out of the bill.

Public comment against the bill, as well as some of the commentary from members of the committee, questioned why only manufacturing companies were exempted from the bill. Major resource extraction companies and associations were present to oppose the bill, including BHP Billiton–the international company that owns the San Juan coal mine.

Rep. Rodella asked that Wirth revisit the bill and consider whether the earmarks for public education should be removed, and to consult with those in the audience opposed to the bill with the possibility of including more exemptions–or “carve outs”– to the bill. And to then bring the bill back Tuesday.