Senate passes big tax bill and waits for House to pass budget

The state Senate passed a bill late Tuesday that would generate $240 million through various tax and revenue measures to help plug a large budget shortfall next year.

The bill passed easily 25 to 15 as Democrats, long divided over what taxes to increase, largely united behind the measure despite past disagreements. Only one Democrat, Sen. Cisco McSorley, D-Albuquerque, opposed the bill.

The measure is a potential cornerstone of a state budget that has eluded the Legislature for over six weeks, through the 30-day regular session and now into a special session.

As the Senate debated the tax measure, the House was in the process late Tuesday of deciding whether to take up a $5.3 billion spending plan. It already had started debating a measure that would raise the state cigarette tax by 75 cents.

The tax measure that passed out of the state Senate combined many proposals state lawmakers already had contemplated during the regular session and this week’s special session.

But no one seemed particularly happy with it, even those lawmakers voting for it.

“This is far from a perfect bill,” said Sen. Eric Griego, D-Albuquerque.

Added Sen. Bernadette Sanchez, D-Albuquerque: “I rise reluctantly to support this bill. It’s painful to stand up here and actually support tax increases. It does hurt everybody.”

And Sen. Lynda Lovejoy, D-Crownpoint, shouted “Reluctantly yes” to snickers when she was asked how she was going to vote.

The bill would generate $240 million by increasing the state’s gross receipts tax by a 1/8 of a penny, closing a state income tax deduction used by people who itemize and requiring the state’s compensating tax to be paid on goods purchased from out-of-state sellers without a physical presence in New Mexico.

The proposal also would allow the state to take back $68 million it gives to local governments to compensate for repealing the gross receipts tax on food several years ago. Albuquerque receives between $34 million to $37 million a year, city officials said Monday.

To make up for the revenue they likely will lose from that clawback, cities and towns could collect taxes on food.

All those measures were packed into the 37-page bill that produced heartburn regardless of partisan affiliation.

Sen. John Arthur Smith, D-Deming, and chairman of the Senate Finance Committee, told his colleagues as unpopular as the legislation was it struck  a balance as it tried to “be sensitive to the private sector as best we can and sensitive to the public sector as best we can.”

“We’re trying to save jobs,” Smith added. “We don’t want to lose government jobs. We don’t want to lose education jobs. And we don’t want to lose jobs in the private sector.”

One senator joked that the bill had managed to unite both Democrats and Republicans.

Democrats have fought among themselves for most of the last year over whether to tax the wealthy or to raise the gross receipts tax and tax food for the first time in years. The GRT made it into the measure, but so did a measure that closed the income tax deduction that will affect people who itemize, who usually are more affluent.

While Democrats showed an unusual display of unity, so did their GOP colleagues who rose to protest the bill and repeatedly tried to amend out various tax measures.

“I can’t believe we are considering raising taxes,” said Sen. Sue Wilson Beffort, R-Albuquerque. “New Mexico has less than 2 million people, and in one month we lost just under 26,000 jobs. I just think we need to get a grip on what runs an economy.”

Sen. William Payne, R-Albuquerque, meanwhile, estimated that closing the income tax deduction would constitute a tax on 136,000 New Mexican families.

And Sen. Kent Cravens, D-Albuquerque, argued that New Mexico’s success was built on effort and hard work and imposing new taxes would erode that.

“I hate to see us throw that back in their face with a tax, and another tax,” he said