I am writing today to announce the closure of the New Mexico Independent. After three and a half years of operation in New Mexico, the board of the American Independent News Network, has decided to shift publication of its news…
Richardson vetoes food tax—updated
“It’s regressive. It hurts middle-income families in New Mexico. It hurts the poor. And it goes against a campaign pledge and one of my strongest accomplishments, which was eliminating that food tax” in 2005, the governor said during a midday news conference to explain his reasons for vetoing the provision. “It’s the right thing to do. It is the fair thing to do for working New Mexican families.”
The veto cancels $68 million the state had counted on to help address a projected shortfall next year. But the governor said he had a plan for plugging the hole, one involving the use of federal stimulus money and the state’s reserves.
Advocates greeted Richardson’s veto of the food tax provision with near elation Tuesday.
“You were a hero when you led the fight to repeal the tax, and you are a hero today by continuing your commitment and I think this is going to be a cornerstone of your legacy … as governor,” said Fred Nathan of Think New Mexico, a Santa Fe think tank that was integral in the move to eliminate the tax on food in 2005.
Allen Sanchez of the New Mexico Conference of Catholic Bishops played off the time of year to laud Richardson.
“In the business we’re in we like to promote resurrection but not the resurrection of that bill,” Sanchez said, referring to Easter. The Catholic bishops vigorously opposed re-imposing a gross receipts tax on food after the state had lifted it a few years ago.
Others also applauded Richardson’s action.
“We didn’t believe the food tax should have been in the package in the first place,” said Bill Jordan, Policy Director for New Mexico Voices for Children.
Richardson’s action Tuesday came after a prolonged, coordinated campaign by advocates that included sending letters and e-mails to Richardson’s office, as well as one-on-one meetings with the governor.
Not everyone was thrilled by the governor’s decision Tuesday. At least one legislative leader hinted at a sense of betrayal at seeing the governor line-item veto the measure and talk about how it hurt low-income and middle-income families.
“Had he indicated three weeks ago that he would not support the legislation we would have taken a different approach,” Sen. Majority Leader Michael Sanchez, D-Belen, said. Much of the support for a food tax provision came from the Senate, whose leaders pushed for it rather than raising the state income tax.
“He was involved every step of the way,” Sanchez continued in his statement. “At no time during the special session did he raise any objections. He was very clear about what he wouldn’t support which is why the legislative and executive compromise we crafted didn’t include an income tax increase or a requirement that all corporations pay their fair share of taxes.”
Richardson said he had plans to plug the $68 million hole left by the line-item veto and outlined them Tuesday. He would use $20 million in federal stimulus money, veto a $5 million expansion of a low-income tax rebate and remove earmarks on $13 million of the $33 million raised by a 75-cent hike to the state’s cigarette tax, which Richardson also signed into law Tuesday.
That $13 million, which had been diverted to early child development, now goes to the state’s main account, the general fund.
Richardson also said he’d tap the state’s reserves to make sure the state’s budget was balanced. And if that wasn’t enough, the governor said he’d use an authority just granted to him by the Legislature to make cuts to state agencies.
Sen. John Arthur Smith, D-Deming, a prominent supporter of the food tax, said the governor should add one more item to his budget-balancing plan: prayer.
“Those revenues have to be in place,” Smith said. “Otherwise he’s aggravated this problem.”
Smith and some other powerful legislators have called into question forecasts that predict the state’s revenues will grow by 6 percent next year. If they don’t, that would mean the states budget would once again be out of balance as revenues failed to keep up with expenses.
Asked where he would look to cut if tapping reserves weren’t enough to balance next year’s budget, Richardson said, “Well I don’t want to have layoffs. I don’t want any more furloughs.”
State workers were forced to take five furlough days this year to address a budget shortfall this year.
The food tax would have reapplied local and county gross receipts taxes on food, which average about 2 percent across the state, while clawing back annual state payments to local governments. Those payments were made to compensate for the annual loss of revenue caused by the repeal of the food tax in 2005.
Some cities, including Albuquerque, could have lost money had the provision been signed into law. In Albuquerque’s case,the loss could have neared $5 million over two years.
The food tax provision wasn’t the only measure Richardson took action on Tuesday. The governor signed into law a $5.3 billion state budget and several tax increases, including a 75-cent hike to the state’s cigarette tax.
On July 1 the state’s gross receipts tax will rise by an eighth of a cent July 1 while a deduction used by people who itemize their state income tax returns will disappear, meaning they will pay more in state income tax.
A leading New Mexico children’s advocacy organization gave Richardson mixed marks Tuesday. Part of Richardson’s budget–balancing plan included vetoing a $5 million expansion to the state’s Low Income Comprehensive Tax Rebate.
“The LICTR increase was intended to offset the one-eighth cent increase in the GRT as well, and unfortunately that increase is still intact. This will make it harder for working families to buy non-food necessities like diapers and aspirin,” said Jordan of New Mexico Voices for Children.
In signing into law the 75-cent hike to the state cigarette tax, Richardson vetoed language that ended the increase after four years, effectively making the tax increase permanent.
He also vetoed language in the cigarette tax bill that would have diverted millions of dollars to early childhood development. That money now goes into the state’s general fund.
“We’re pleased that the Governor kept the tobacco tax and made it permanent, because that will keep young people from taking up smoking and convince some long-time smokers to quit,” Jordan said. “But his decision to divert the $11 million from programs that help our kids succeed in school is a real disappointment. These programs have already taken a big hit from recent budget cuts.”