New Mexico Taxpayers' Opportunity —
Prosperity Safeguard (TOPS) Amendment

2003 (Special): HB 15: Tax Relief and Highway Projects

This inappropriately named bill has nothing to do with tax relief.  Instead it is one of the largest tax increase passed during the 2003 and 2004 legislative sessions.  The bill increases several fees and taxes that support the state road fund.

State Road Fund will see a revenue increase of $5.6 million in FY04 and $60.3 million in FY05 and subsequent years.

Citizens face numerous taxes.  For a complete listing of the changes click here

2003: HB 25: Tire Recycling Fees

The bill increases the annual tire recycling fee. 

The Tire Recycling Fund will see a revenue increase from $0.750 million to $0.850 million in FY04 and subsequent years.

• Motorcycles: fee increase from $0.50 per tire to $1.00 per tire.
• Passenger Vehicles, Trucks and Tractors: fee increase from $1.00 per tire to $1.50 per tire.
• Buses: fee increase from $0.25 per wheel to $0.50 per wheel.

2003: HB 431: Amend Thanatopractice Act

House Bill 431 makes a number of changes in the regulatory power of the Thanatopractice Board (the board responsible for regulating those who are in the business of handling the deceased).  The Bill gives new authority to the board to impose fines of up to $5,000 for those who act without a license.

Indeterminate.

Unlicensed thanatologists can face a fine of up to $5,000 for operating without a license.

2003: HB 644: Maintain Gasoline Tax Rate

In 1995, the Legislature passed a law that would lower the Gasoline Tax rate from 17 cents per gallon to 16 cents per gallon.  House Bill 644 repeals that law, leaving the tax at 17 cents per gallon.

The State Road Fund, State Transit Fund, County and Municipal Road Funds and various other funds will see a revenue increase of $5.76 million in FY04 and $6.396 million in FY05 and subsequent years.

The Gasoline Tax would have been cut from 17 cents per gallon to 16 cents per gallon, but House bill 644 cancels the tax cut.

2003: SB 43: Amend Real Estate Licensing

The Real Estate Commission is permitted to impose license fees on real estate salespersons and brokers.  The fees are capped statutorily.  Senate Bill 43 increases the three-year license fee cap from $180 to $270.

The Real Estate Commission Fund and the Real Estate Recover Fund will see a revenue increase of $0.282 million in FY04 and $0.286 million in FY05.

Licensed realtors face a three-year fee increase of $90 (from $180 to $270).

2003: SB 453: NM Board of Dentistry Changes

Senate Bill 453 makes a number of regulatory changes to the Board of Dental Health Care.  It also increases fees for licensure of dentists, non dentist owners and dental hygienists.

Indeterminate.

The bill allows the Board of Dental Health Care and the Dental Hygienists Committee to establish a number of fees not to exceed certain statutory limits.  These fees are numerous.  Click here for a detailed description of the permissible fees.

2003: SB 574: Increase Liquor License Fees

Senate Bill 574 increases the application fee for the issuance of new liquor licenses and for the transfer of old licenses by $50.  It also increases the fees for annual renewal of retailer dispenser, canopy, and restaurant licenses by $50.

The General Fund will see a revenue increase of $1.500 million in FY04, FY05 and subsequent years.

Those needing liquor, dispenser, canopy or restaurant fees will face fee increases of $50.

2003: SB 621: Withhold Oil and Gas Payments to Nonresidents

Senate bill 621 imposes a tax on non-New Mexico residents.  It then earmarks the tax revenue from the General Fund toward a fund which pays retired New Mexico state legislators.  The tax is called a Withholding Tax.  It applies to all payments of oil and gas proceeds derived from New Mexico wells and made to non-residents.  The tax is set at 6.75 percent through December 31, 2004.  Thereafter, however, the Department of Taxation and Revenue is given discretion to set the rate, so long as it does not exceed the top marginal income tax rate or the top corporate income tax rate.  Two potential problems plague the bill.  First, it may be unconstitutional.  The Privileges and Immunities Clause of the U.S. Constitution makes it illegal for a state to attempt to treat residents of another state differently than it does its own citizens.  The bill, therefore, may face legal challenge.  Secondly, the bill not only challenges constitutional law, but also the laws of economics.  It is one of the basic tenets of public finance theory that the statutory incidence of a tax is not necessarily the economic incidence.  The bill’s attempt to target its ill-effects on non-residents, therefore, is not likely to meet with success.  In response to the tax, out of state investors may very well decide to withdraw their capital from New Mexico, harming New Mexico citizens and business.

The tax increases General Fund revenue by $1.0 million in FY04 and by another $1.0 million in FY05.  Another portion of the bill, however, earmarks $1.6 million from the General Fund into the Legislative Retirement Fund in FY04 and another $2.4 million in FY05.  On net, the tax (increasing revenue to the General Fund) and the earmarking (drawing revenue from the General Fund) amount to a General Fund revenue decrease of $0.6 million in FY04 and another decrease of $1.4 million in FY05.

Out of state owners of New Mexico oil wells face a withholding tax in the amount of 6.75 percent.  New Mexico residents are likely to face economic harm as capital is withdrawn.

2003: SB 804: Increase Cigarette Tax

Senate Bill 804 increases the Cigarette Tax from $0.21 per pack to $0.90 per pack.  This is a 329 percent increase.  Expected to yield a total of $137 million over fiscal years 2004-2006, the bill marks the single largest tax increase over the 2003 and 2004 legislative sessions.  It also earmarks a portion of the receipts from the tax to two dedicated sources.  About 14.52 percent of the tax will go to the New Mexico Finance Authority for the University of New Mexico Health Science Center.  An additional 6.11 percent of the tax will go to the New Mexico Finance Authority for the Department of Health for facilities improvements.  The remainder of the revenue will go to the General Fund.

Total state government revenue will increase by $43.240 million in FY04 and $47.000 million in subsequent years.  General Fund revenue increases are $30.820 million in FY04 and $33.500 million in FY05.  The other state funds will see a revenue increase of $12.420 million in FY04 and $13.500 million in FY05.

Those purchasing cigarettes will face a $0.70 per pack increase from $0.21 to $0.91 per pack.

2004: HB 203: Amend Organic Commodity Act

House Bill 203 allows the Organic Commodity Commission to raise new revenue from fees levied on those who certify organic producers.  It also establishes fees for producers themselves.  These fees might more appropriately be called taxes.

The General Fund will see a revenue increase of up to $0.005 million in FY05 and up to $0.050 million in subsequent years.

Producers and handlers will face a fee (tax) of up to 0.5 percent of total gross sales.  Certified handling operations will face a fee (tax) of up to 0.25 percent of total gross sales.  “Purveyors of materials” will face a fee (tax) of up to 0.5 percent of total gross sales.  All of these fees/taxes are in addition to the standard GRT, which will after this session average about 6.8 percent in municipalities.

2004: HB 205: Increase NM Livestock Board Fee Limits

The New Mexico Livestock Board imposes a number of fees and service charges on the livestock industry.  House Bill 205 establishes some fees and increases others.  Some of these fees can be thought of as user fees, such as the $10.00 charged for the impoundment of trespassing livestock.  Others, however, are more appropriately considered taxes, such as the $50.00 required to obtain a transportation permit.

The Livestock Board Operating Fund will see a revenue increase of up to $1.400 million in FY05 and subsequent years.

The fees are numerous, ranging from an import fee of up to $0.16 per animal to a fee for recording a holding brand of up to $100 per copy.  For a complete list, click here.

2004: HB 471: Contractor and Subcontractor Registration

Any public works construction, renovation or demolition project which receives $20,000 or more from state or local funds is government by the Public Works Minimum Wage Act (established in 1978).  The Act establishes a number of regulations for public works contractors and subcontractors.  House Bill 471 requires contractors and subcontractors who bid on work projects to register with the Labor and Industrial Division of the New Mexico Labor department.  They are also required to pay an annual registration fee of $200.

The General Fund will see a revenue increase of $0.6 million in FY05 and subsequent years.

Those who contract or subcontract with the state face a new $200 registration fee.

2004: HB 625: Food and Medical Services Gross Receipts

House Bill 625 involves two main tax changes: 1) it narrows the tax base by eliminating the Gross Receipts Tax (GRT) on food and health care services provided through managed care; and 2) increases the GRT in municipalities by 0.5 percentage points.  The latter is accomplished by raising the state’s portion of the Tax from 4.5 percent to 5 percent in municipalities (it was already 5.0 percent outside of municipalities).  Counties and municipalities impose their own “local option” GRT on top of the GRT imposed by the state.  Before the change, the average combined GRT in municipalities was about 6.3 percent, so the tax increase will raise the average rate in municipalities to 6.8 percent.  The bill is one of the more complex pieces of legislation of the 2004 Session.  For a more detailed description click here (insert hyperlink to the description below).

The General Fund will see a revenue decrease of $2.7 million in FY05 and $2.7 million in FY06.

The GRT on food and medical services will be eliminated and the GRT on all other goods and services will increase from a statewide municipal average of 6.3 to 6.8 percent. Click here for additional information.

2004: SB 74: Workers’ Comp. Assessments Distributions

New Mexico’s Workers’ Compensation law requires all employers of three or more employees to purchase a workers’ compensation insurance policy for their employees in case the employees are injured or incapacitated on the job (employers in the construction industry are required to have workers’ compensation insurance regardless of the number of employees they have).  If an employer fails to maintain coverage, however, the state’s Uninsured Employers’ Fund pays the benefits.  The Fund is financed by employers who face a quarterly “assessment” (a tax) per employee.  Senate Bill 74 increases the tax on employers from $8 per year per employee to $9.20 per year per employee.

The Uninsured employers’ Fund will see a revenue increase of $0.750 million in FY05 and subsequent years.

Employers face an increase in the Workers Compensation tax from $8 per employee per year to $9.20 per employee per year.

2004: SB 219: Public Accountant Qualifications

Senate Bill 219 amends the requirements to be certified as a pubic accountant and increases the registration fee for certification to $50.

The General Fund will see a revenue increase of $0.020 million in FY05 and subsequent years.

Each applicant for certification as a public accountant will face a $50 registration fee.

2004: SB 385: Health Facility Daily Bed Surcharge

Medicaid (the state/federal program which pays the medical expenses of the indigent) uses a “matching” funding system whereby states choose the amount they want to spend on Medicaid and the federal government spends some multiple of that amount based on a “matching formula.”  Each state operates under a different matching formula and New Mexico’s is one of the most generous: For every dollar that the state of New Mexico spends on its Medicaid program, the federal government spends 3 more dollars in the state.  As noted in other RGF work, the matching system provides perverse incentives for states to over-expand their Medicaid programs insert link to RGF Medicaid Study.  Senate Bill 385 is designed to raise more money from federal taxpayers through the Medicaid matching funding system.  The bill artificially raises Medicaid expenses by imposing a “Daily Bed Surcharge” on licensed nursing home, licensed intermediate care facilities for the mentally retarded, and licensed residential treatment centers.  The tax may not exceed either 6 percent of the total annual gross receipts of the facility or $8.82 per bed per day.  Though the tax is designed to raise Medicaid expenses (and therefore attract 3 federal dollars for each new state dollar spent), the revenues from the tax are earmarked for the Medicaid program itself.  To offset the cost this scheme places on patients, the legislature created Senate Bill 436 which credits taxpayers for their expenses.  It is unclear at this point whether the daily bed surcharge scheme will stand up to federal government court challenges.

The General Fund will see a revenue increase of $22.5 million in FY05 and subsequent years if the tax survives court challenges.  The Legislature is hoping that the tax will raise additional revenue from Federal taxpayers, but this amount has not been determined yet.

Care facilities and users of the facilities face a new tax of up to $8.82 per bed per day, or 6 percent of their annual gross receipts.

2004: SB 502: Health Insurance Premiums Tax Increase

Premiums on health insurance are subject to the state’s Health Insurance Premium Tax.  It had been set at 3 percent.  Senate Bill 502 first raises the Health Insurance Premium Tax rate from 3 percent to 3.003 percent.  It then creates a “surtax” (a new tax on top of an existing tax).  This new tax, the Health Insurance Premium Surtax is set at 1 percent, bringing the net state tax on health insurance premiums to 4.003 percent.

The General Fund will see a revenue increase of $12.4 million in FY05 and another increase of $19.5 million in FY06.

Net taxes on health insurance premiums will increase from 3 percent to 4.003 percent.

2004: SB 536: Revise Pharmaceutical Business License Fee

Wholesale drug distributors, manufacturers and warehouses in New Mexico are required to obtain a license to operate in the state and must pay a fee to obtain that license.  The fees are set by the Board of Pharmacy but limited by the legislature.  Like most such arrangements in the state, the Board tends to charge the maximum fee permitted by the legislature.  Senate Bill 536 increases the licensing fee maximum from $300 per year to $5,000 per year.  This is an increase of more than one-thousand-five-hundred percent!  The new fees are intended to raise revenue for a prescription drug benefit for New Mexico seniors.  The bill contains language dropping the annual fee down to $1,000 upon “implementation” of the federal Medicare prescription drug benefit.  Unfortunately, that law is implemented in stages and won’t take full effect until 2006.  Personnel at the Board of Pharmacy say they plan on imposing the $5,000 annual fee until the federal law is in full effect.

The Pharmacy Fund will see revenue increases of $2.9 million in FY05 and subsequent years.

The current annual licensing fee of $300 for wholesale drug distributors, manufacturers and warehouses in New Mexico will increase to $5,000.

2004: HB 231: Regional Transit Gross Receipts Imposition

The state imposes a Gross Receipts Tax (GRT) on all goods and services sold in the state (see HB 625 on recent changes in the rate and base of the GRT).  Counties and municipalities are permitted by state law to impose several different local GRTs on top of the state rate.  Previous statutes had allowed counties and municipalities 17 different local option taxes on gross receipts, each limited by state law.  House Bill 231 creates a new local option rate.  It is permitted to be as high as 0.5 percent of gross receipts, though new impositions may only be imposed in 0.0625 increments (so it would take 8 years of successive increases to reach the full taxing authority).  A simple majority of voters is required to impose the tax.  Without new legislation, combined state, county and municipal GRT rates will average 6.8 percent starting in 2005.  Another bill passed this session, Senate Bill 88 increased another local option rate by 0.0625 percentage points, so in some areas, the combined GRT may reach about 7 percent next year.

Counties may see a revenue increase ranging from $14.250 million in FY05, up to $114 million in subsequent years.  This assumes all counties act on the new authority and can secure voter approval of the tax increases.

With voter approval, both counties and municipalities are permitted to impose additional taxes of up to 0.5 percent on gross receipts, so long as the tax does not increase by more than 0.0625 percentage points in one year.  Combined state, county and municipal rates will average 6.8 percent in 2005; so the new authority, if acted on, would raise the GRT in some areas to around 7 percent.

2004: SB 88: Expand County Gross Receipts Tax Authority

The state imposes a Gross Receipts Tax (GRT) on all goods and services sold in the state (see HB 625 on recent changes in the rate and base of the GRT).  On top of the state rate, each county and municipality is permitted to impose its own general rate, plus several additional GRTs (HB 231 recently permitted a new county GRT add-on).  The local rates are limited by state law, however.  Senate Bill 88 makes a number of changes to the rules governing the general county GRT authority.  Most importantly, the bill increases the general rate that counties are permitted to impose.  The maximum general rate that counties had previously been permitted to impose was 0.375 percent.  Senate Bill 88 increases this taxing authority by 0.0625 percentage points to 0.4375 percent.  Counties are still required to seek voter approval in a referendum for the tax increase to take effect.  Other provisions of the bill eliminate limits that had constrained the amount of time that certain county Gross Receipts Taxes were allowed to remain in effect.

Counties are permitted to increase revenue by up to $64.4 million in FY05, with more revenue possible in subsequent years.  This assumes all counties act and that all are able to secure voter approval for the increases.

Taxpayers may face a County Gross Receipts Tax increase of 0.0625 percentage points, bringing the general County Gross Receipts Tax from 0.375 percent to 0.4375 percent.  This is on top of other county GRTs, the State GRT and Municipal GRTs.  Combined state, county and municipal rates will average 6.8 percent in 2005; so the new authority, if acted on, could raise the rate in some areas to nearly 6.9 percent.

2004: SB 518: Revenue for County General Health Purposes

New Mexico counties impose Property Taxes, the rates of which are limited by state law and must be approved by voters.  Senate bill 518 increases the maximum rate permissible for the County Property Tax in so called “Class B” counties.  These are counties with between 41 and 45 thousand residents.  Currently, the only county classified as Class B is Rio Arriba.  The revenue from the Property Tax increase is to be earmarked for health spending on the sick and indigent.  The rate increase is from 28.9 mills (a $28.9 tax every $1,000 of net taxable property) to 31.9 mills in 2006.

Rio Arriba County will see a revenue increase of approximately $1.65 million in FY05, with more revenue in subsequent years.

Rio Arriba’s current average property tax is 28.9 mills ($28.9 dollars for every $1,000 of net taxable property).  This could be increased to 30.4 mills in FY05 and to 31.9 the following year.

2003: HB 167: Reduce Income Tax Rates

The bill reduces the number of Income Tax brackets from 7 to 4.  Previously, marginal Income Tax rates ranged from 1.7 percent (on the first $8,000 of income) up to 8.2 percent (on income $101,000 and above).  In 2007 when the bill is fully phased in, marginal Income Tax rates will range from 1.7 percent (on the first $8,000 of income) to 4.9 percent (on income $24,001 and above).  In addition, the bill makes changes to the Capital Gains Tax.  Taxpayers are permitted to deduct the greater of $1,000 or the following percentage of their net capital gain income:

· In tax year 2003: 10%;

· In tax year 2004: 20%;

· In tax year 2005: 30%;

· In tax year 2006: 40%;

· In tax year 2007 and after: 50%

The General Fund will see a revenue decrease of $21.786 million in FY04, $61.221 million in FY05, $84.173 million in FY06 and $108.008 million in FY07.

Top marginal Income Tax rates will go from 8.2 percent in 2003 to 4.9 percent in 2007.  For a complete description click here

2003: HB 920: Income Tax Act Definition of “Resident”

House Bill 920 expands the definition of New Mexico resident to include anyone physically present in the state for 185 days or more.

The General Fund will see a revenue increase of $4.000 million in FY04 and another $4.000 million in FY05 and subsequent years.

None.

2003: SB 331: Premium Tax Exemption

Previous law had allowed an exemption on the Insurance Premium Tax for all government contracts.  Senate Bill 331 eliminates the exemption for all contracts “except those generated for the benefit of current or retired employees.”

The General Fund will see a revenue increase of $32.000 million in FY04.

The normal Insurance Premium Tax rate is 3 percent (it is 0.9 percent for insurers with at least 40 percent of their assets invested in New Mexico investments).  This rate will now apply to government contracts.

2003: HB 62: Increase Jet Fuel Tax Deduction

The bill increases the Gross Receipts and Compensating Tax deduction for jet fuel from the current 40 percent deduction to a 50 percent deduction.

The General Fund will see a revenue decrease of $0.0764 million in FY04 and $0.0833 million in subsequent years.  Local Government revenues will decrease by $0.054 million in FY04 and $0.0589 million in subsequent years.  Other state funds will experience a revenue decrease of $0.040 million in FY04 and FY05.

In the 2004 Legislative Session, the GRT increased in municipalities by 0.5 percentage points, putting the average rate at about 6.8 percent (see HB 625 from the 2004 Session).  Jet fuel previously enjoyed a 40 percent deduction which would have made the average effective GRT rate in 2004 equal to 4.08 percent (0.6 times 6.8).  But now that jet fuel will receive a 50 percent deduction in GRT, its average rate of GRT taxation is 3.4 (0.5 time 6.8).  Note: this is a special deduction for jet fuel only.

2003: SB 213: Clinical Laboratories Gross Receipts Deduction

The bill allows accredited clinical laboratories to deduct Medicare receipts from their Gross Receipts Tax base.  The deduction is phased-in over three years, so that the full deduction is allowed in 2006.

The General Fund will see a revenue decrease of $0.320 million in FY04, $0.665 million   in FY05 and $1.100 million in FY06.  Local Government revenue will decrease by $0.250 million in FY04, $0.520 million in FY05 and $0.860 million in FY06.

Uncertain.

2003: SB 654: Tricare Services Gross Receipts

Tricare is a managed care health insurance program for Federal Military personnel.  Senate Bill 654 provides doctors and osteopathic physicians a gross receipts tax deduction for receipts from the third-party administrators of Tricare.  Note: in the next legislative session House Bill 625, exempted all managed care services from the Gross Receipts Tax see here.

The General Fund will see a revenue decrease of $0.350 million in FY04 and anther decrease of $0.350 million in FY05.  In addition, local funds face a revenue decrease of $0.195 million revenue in FY04 and another decrease of $0.215 million in FY05.

Doctors and osteopathic physicians face no Gross Receipts Tax on payments from Tricare.

2004: HB 625: Food and Medical Services Gross Receipts

House Bill 625 involves two main tax changes: 1) it narrows the tax base by eliminating the Gross Receipts Tax (GRT) on food and health care services provided through managed care; and 2) increases the GRT in municipalities by 0.5 percentage points.  The latter is accomplished by raising the state’s portion of the Tax from 4.5 percent to 5 percent in municipalities (it was already 5.0 percent outside of municipalities).  Counties and municipalities impose their own “local option” GRT on top of the GRT imposed by the state.  Before the change, the average combined GRT in municipalities was about 6.3 percent, so the tax increase will raise the average rate in municipalities to 6.8 percent.  The bill is one of the more complex pieces of legislation of the 2004 Session.  For a more detailed description click here (insert hyperlink to the description below).

The General Fund will see a revenue decrease of $2.7 million in FY05 and $2.7 million in FY06.

The GRT on food and medical services will be eliminated and the GRT on all other goods and services will increase from a statewide municipal average of 6.3 to 6.8 percent. Click here for additional information.

2004: SB 86: No Excise Tax on Fuel-Efficient Vehicles

When the title for a highway vehicle is transferred, New Mexico’s Motor Vehicle Excise Tax is imposed.  It is set at 3 percent of the value of the vehicle.  Senate Bill 86 provides a one time exemption from this tax for gasoline-electric hybrid vehicles with a U.S. environmental protection agency fuel economy rating of at least 27.5 miles per gallon.

The General Fund will see a revenue decrease of $0.330 million in FY05 and $0.400 million in FY06.

The 3 percent Motor Vehicle Excise Tax goes to zero for “fuel  efficient vehicles.”

2004: SB 333: Military Base Retention

Out-of-state goods and services used by New Mexico residents face the Compensating Tax (so named because it is supposed to compensate for the fact that New Mexican vendors face the Gross Receipts Tax while out-of-state vendors do not).  Senate Bill 333 exempts equipment purchased for the performance of contracts with the Department of Defense from the Compensating Tax.  As the bill name implies, this special exemption is designed to lower the cost of performing contracts with the Department of Defense and therefore encourage the Federal Government to maintain military bases in New Mexico.

The General Fund will see a revenue decrease of $0.160 million in FY05.    Revenue decreases in subsequent years are likely but indeterminate.

The Compensating Tax is set at 5 percent.  Those interests favored by this legislation are no longer subject to this tax.

2003: HB 146: Expand Renewable Energy Tax Credit

During the 2002 Session, the Legislature adopted the Renewable Energy Production Credit.  It allows qualifying facilities a $0.01 credit against their corporate income tax liability for every kilowatt-hour of “renewable energy” power supplied by the facility.  This bill expands the total amount of eligible electricity for which credits could be allowed from 800 thousand megawatt-hours to 2 million megawatt-hours.  It also expands the definition of “renewable energy” to allow biomass facilities to claim the credit (these are facilities which use animal waste, tree thinning and lumber mill/sawmill residues).  In addition, qualified energy recourses would be expanded to include “a fluidized bed technology or similar low emissions” technology in addition to zero-emissions technology.

The General Fund will see a revenue decrease of $0.075 million in FY05 and subsequent years.

It is difficult to ascertain the precise impact this bill will have on taxpayers.  The interests favored by this bill will see a reduction in their taxes.

2003: HB 179: Amend Investment Credit Act

The Investment Credit Act of 1978 allows businesses to claim a tax credit equal to 5 percent of the value of qualified equipment purchased and used for certain manufacturing operations in the state.  The credits may be claimed against Gross Receipts, Compensating or Withholding Tax liability.  The Investment Credit Act also requires that manufacturers employ a certain number of people for each $500,000 increment of equipment against which the credit is claimed.  House Bill 179 reduces the number of employees required at each increment.

The General Fund will see a revenue decrease of $0.500 million in FY04 and another $1.000 million decrease in FY05 and subsequent years.

It is difficult to ascertain the precise impact this bill will have on taxpayers.  The interests favored by this legislation (namely, those businesses whose production process is capital intensive) will see a reduction in their taxes.

2003: HB 572: Career Preparation Education Tax Credit

House Bill 572 creates a tax credit for employers who hire students.  The Credit can be taken against corporate or personal income tax liability and is equal to 50 percent of the gross annual wages paid to qualifying students.  Employers are only allowed to claim the credit against a maximum of 10 qualifying students and only up to 320 hours per student.  No taxpayer would be allowed to claim more than $12,000 in credits in any tax year.  Qualified students must be aged 14 to 21 years, enrolled full time at an accredited New Mexico secondary school and participating in a certified summer “school-to-career program.”

The General Fund will see a revenue decrease of $0.450 million in FY04 and another $0.450 million in FY05 and subsequent years.

Uncertain.

2004: SB 28: High Wage Jobs Tax Credit

Senate Bill 28 allows employers to take a tax credit against their combined state tax liability (that is, against their liability for GRT, Compensating and other state taxes).  The credit is equal to 10 percent of the wages and benefits the employer pays new “high wage” employees.  An eligible “high wage” job must be:

1. Created after July 1, 2004 and before July 1, 2009;
2. Occupied for at least 48 weeks prior to the claim for credit;
3. Pay at least $40 thousand per year if the job is located in municipality of 40,000 or more, or pay at least $28 thousand per year if the job is located elsewhere in the state. 

The credit is limited to $12,000 per eligible employee.  Credits may be claimed for up to four years.  The business claiming the credit must be a “growing business,” with employment greater on the last qualifying day of the credit than on the day when the new position was created.

The General Fund will see revenue decreases of $0.600 million in FY05 and $2.250 million in subsequent years.  Local governments will see revenue decreases of $0.070 million in FY05 and $0.250 million in subsequent years.

It is difficult to ascertain the precise impact this bill will have on taxpayers.  The businesses who meet the specific requirements set forth in the bill will see a reduction in their taxes.

2004: SB 436: Nursing Home and Care Facility Tax Credit

Senate Bill 436 is designed to off-set the cost of the Health Facility Daily Bed Surcharge.  The Daily Bed Surcharge is technically paid by healthcare facilities, but some of the cost of the tax will be passed off onto consumers and their insurance companies.  Senate Bill 436 creates an income tax credit for expenses paid to facilities facing the Daily Bed Surcharge.   The credit is limited to $10 per day and can only be taken by individuals.  Thus, insurance companies which face a portion of the Daily Bed Surcharge are not eligible for this offsetting credit.  Insurance companies will no-doubt pass some of this cost off on their clients in the form of higher premiums.  Because only private individual payers are eligible for this credit, it offsets less than 10 percent of the cost of the Daily Bed Surcharge.

The General Fund will see revenue decreases of up to $2.16 million in FY05 and again in FY06.  These decreases offset only a fraction of the $22.5 million revenue increases associated with the Daily Bed Surcharge.

State taxpayers who face the Daily Bed Surcharge Tax (up to $8.82 per bed per day or up to 6 percent of the facility’s gross income) can claim a credit of up to $10 per bed per day against their income tax liability.  State taxpayers who face higher premiums because the Daily Bed Surcharge or who are otherwise adversely affected by the tax do not receive a credit.

2003: HB 229: Increase Small Counties Assistance

The Small Counties Assistance Act distributes state taxpayer funds to small counties based on a complex formula.  House Bill 229 amends the formula and expands the definition of “small” counties that qualify for the fund from those with a population of 45,000 to those with a population of 48,000.

The General Fund will see a revenue decrease of $0.800 million in FY04 and again in FY05.

None.

2003: HB 321: Oil and Gas Reclamation Fund Distribution

Under existing statute, a portion of the Oil and Gas Conservation Tax is earmarked for the Oil and Gas Reclamation Fund (the remainder goes to the General Fund).  The proportion that goes to the Reclamation Fund, furthermore, increases as the Tax increases.  House Bill 321 raises the distributions to the Reclamation Fund at each tax level.

The General Fund will see a revenue decrease of $0.624 million in FY04 and $0.495 million in FY05.

None.

2003: HB 322: Amend Small Cities Assistance Act

The Small Cities Assistance Act distributes state taxpayer funds to small cities based on a formula.  House bill 322 amends the formula and expands the definition of “small” cities that qualify for the fund.  It also increases the minimum distribution amount to $35,000 and increase the maximum distribution amount from $50,000 to $56,000.

The General Fund will see a revenue decrease of $0.650 million in FY04 and another $0.650 million in FY05 and subsequent years.

None.

2003: SB 621: Withhold Oil and Gas Payments to Nonresidents

Senate bill 621 imposes a tax on non-New Mexico residents.  It then earmarks the tax revenue from the General Fund toward a fund which pays retired New Mexico state legislators.  The tax is called a Withholding Tax.  It applies to all payments of oil and gas proceeds derived from New Mexico wells and made to non-residents.  The tax is set at 6.75 percent through December 31, 2004.  Thereafter, however, the Department of Taxation and Revenue is given discretion to set the rate, so long as it does not exceed the top marginal income tax rate or the top corporate income tax rate.  Two potential problems plague the bill.  First, it may be unconstitutional.  The Privileges and Immunities Clause of the U.S. Constitution makes it illegal for a state to attempt to treat residents of another state differently than it does its own citizens.  The bill, therefore, may face legal challenge.  Secondly, the bill not only challenges constitutional law, but also the laws of economics.  It is one of the basic tenets of public finance theory that the statutory incidence of a tax is not necessarily the economic incidence.  The bill’s attempt to target its ill-effects on non-residents, therefore, is not likely to meet with success.  In response to the tax, out of state investors may very well decide to withdraw their capital from New Mexico, harming New Mexico citizens and business.

The tax increases General Fund revenue by $1.0 million in FY04 and by another $1.0 million in FY05.  Another portion of the bill, however, earmarks $1.6 million from the General Fund into the Legislative Retirement Fund in FY04 and another $2.4 million in FY05.  On net, the tax (increasing revenue to the General Fund) and the earmarking (drawing revenue from the General Fund) amount to a General Fund revenue decrease of $0.6 million in FY04 and another decrease of $1.4 million in FY05.

Out of state owners of New Mexico oil wells face a withholding tax in the amount of 6.75 percent.  New Mexico residents are likely to face economic harm as capital is withdrawn.

2003: SB 771: Amend Workers’ Compensation Act

Senate Bill 771 creates the Uninsured Employers’ Fund and appropriates $500,000 from the Workers’ Compensation Administration Fund to the new Uninsured Employers’ Fund.  The money will be used as a last resort for claims against uninsured employers.  The earmarking is for FY04 only.

General Fund revenue is unaffected.  The bill entails a Workers’ Compensation Administration Fund revenue decrease of $0.5 million in FY04 and an Uninsured Employers’ Fund increase of $0.5 million in FY04.

None.

2003: SB 804: Increase Cigarette Tax

Senate Bill 804 increases the Cigarette Tax from $0.21 per pack to $0.90 per pack.  This is a 329 percent increase.  Expected to yield a total of $137 million over fiscal years 2004-2006, the bill marks the single largest tax increase over the 2003 and 2004 legislative sessions.  It also earmarks a portion of the receipts from the tax to two dedicated sources.  About 14.52 percent of the tax will go to the New Mexico Finance Authority for the University of New Mexico Health Science Center.  An additional 6.11 percent of the tax will go to the New Mexico Finance Authority for the Department of Health for facilities improvements.  The remainder of the revenue will go to the General Fund.

Total state government revenue will increase by $43.240 million in FY04 and $47.000 million in subsequent years.  General Fund revenue increases are $30.820 million in FY04 and $33.500 million in FY05.  The other state funds will see a revenue increase of $12.420 million in FY04 and $13.500 million in FY05.

Those purchasing cigarettes will face a $0.70 per pack increase from $0.21 to $0.91 per pack.

2004: HB 234: State Aviation Distributions

A certain portion of the revenue collected from the Gross Receipts Tax on jet-fuel is earmarked from the General Fund to the State Aviation Fund.  House Bill 234 increases the amount of earmarking from 4.31 percent to 4.79 percent of the revenue from the GRT on jet-fuel.

The General Fund will see revenue decreases of $0.0278 million in FY04 and $0.0667 million in FY05.

None.

2004: HB 240: Create Insurance Operations Fund

House Bill 240 creates the Insurance Operations Fund.  All money received by the Insurance Division is then earmarked to the new Fund (instead of going to the General Fund).

The General Fund will see a revenue decrease of $1.1117 million in FY05.

None.

2004: HB 376: Amend Small Counties Assistance Act

A bill passed in 1978 called the Small Counties Assistance Act established a complicated formula whereby the state distributed money from the General Fund to the Small Counties Assistance Fund and from there to small counties within the state.  House Bill 376 amends the 1978 act by changing the formula by which distributions from the Assistance Fund are made to small counties.  The bill expands the definition of small counties, allowing more funds to be distributed.

The General Fund will see a revenue decrease of $0.200 million in FY05.  Small counties will see and equal and opposite revenue increase.

None.

2004: SB 53: Amend Small Cities Assistance Act

By the Small Cities Assistance Act of 1979, the state transfers money from the General Fund to the Small Cities Assistance Fund and then from there to small cities.  These distributions are determined by a complicated formula.  Senate Bill 53 amends the Act by eliminating the $56 thousand maximum distribution amount.  It also eliminates a clause which had required that money in the Small Cities Assistance Fund not distributed to the cities be reverted to the General Fund.  These two provisions amount to an increase in earmarking from the General fund.

The General Fund will see a revenue decrease of $0.680 million in FY05 and another decrease of $0.700 million in FY06.  Local government revenue will increase by $0.680 million in FY05 and another increase of $0.700 million in FY06.

None.

2004: SB 114: Gas Tax Proceeds Distribution

Native American Tribes are generally not permitted by the state to sell gasoline outside of their tribal boundaries.  Previous law had exempted the Nambe and Santo Domingo Tribes from this prohibition, allowing each to sell up to 30 million gallons of gasoline outside of their boundaries.  Senate Bill 114 is designed to prevent these tribes from selling beyond their borders.  It does so by effectively bribing Nambe and Santo Domingo, offering them money in exchange for not selling beyond their borders.  If these tribes do not sell outside of their territory, each will receive 40 percent of the Gasoline Tax revenue on 30 million gallons sold by others outside of these tribal lands.  Note: gas sold by tribal distributors is not subject to the state Gasoline Tax if the tribes impose their own Gasoline Tax.

Various state, local and tribal funds are affected by this bill and sources vary regarding the bottom line.  The latest estimates are that state funds will see revenue increases of $0.835 million in FY05 and FY06.  Municipal and county funds will see net revenue increases of $1.220 million in FY05 and FY06.  Tribal Funds will see revenue increases of $2.040 million in FY05 and FY06.

It is unclear what the final impact on taxpayers will be.

2004: SB 363: Racetrack Finances and Leases

Horse racetrack operators with casinos are currently required to pay a 2.1888 percent tax on wagering called the Pari-mutuel Tax.  The facilities are given a choice as to what the revenue from the tax will be used for: 1) it can simply go the state’s General Fund to be used for state government appropriations; or 2) it can be credited back to the racetracks and reinvested in certain specified capital improvements.  (Not surprisingly, racetrack operators usually choose to reinvest the revenue in capital improvements.)  Senate Bill 363 changes the statute so that 50 percent of the Pari-mutuel Tax is earmarked to the State Fair.  Since earmarking money to the State Fair reduces the credit going back to the racetrack facilities, the bill contains another provision which expands the uses to which the remaining racetrack credit can be put.

The State Fair Fund will see a revenue increase of $0.950 million to $2.5 million.  Most of this money would have otherwise gone to racetrack facilities for investment in capital improvements and the rest would have gone to the state General Fund for general appropriations.  It is unclear how much money would have gone to the General Fund, so the General Fund revenue loss associated with this bill is indeterminate.

None.

2003: SB 298: Abolish Tobacco Settlement Permanent Fund

In November of 1998, New Mexico and several other states settled a court case with tobacco product manufacturers which forced the manufacturers to pay millions of dollars to the states.  At the time of the settlement, a “Tobacco Settlement Permanent Fund” was established to receive these funds paid by the manufacturers.  It was said that the fund was established to finance health care and education spending.  Senate Bill 298 ends this earmarking practice and for FY03 and FY04 diverts all tobacco settlement payments from the Tobacco Permanent Fund to the General Fund for other uses.  Beginning in FY05, the diversion ceases and 50 percent of the revenues will again be transferred to the tobacco settlement program fund.

Overall government revenue is unaffected.  There will be a General Fund revenue increase of $49.45 million in FY03 and another increase of $37.2 million in FY04.  The Tobacco Settlement Permanent Fund will face equal and opposite revenue decreases in FY03 and FY04.

None.

2003: SJR 6: Permanent School Fund Distributions (Constitutional Amendment 2)

In 1898, some 14 years before New Mexico became a state, the Land Grant Permanent Fund was established by the US Congress.  It transferred millions of acres of federal lands and mineral interests from the Federal Government to the Territory of New Mexico.  The lands were to be held in trust for the benefit of public schools and 19 other state institutions. 

All proceeds from the sale of state land, five percent of the proceeds from the sale of federal land, royalties from natural resource production, and other incomes from public land are all transferred to the Land Grant Permanent Fund.  As the name implies, the Fund was intended to be permanent.  Its corpus is invested in financial instruments earning a rate of return.  Money is then continually distributed from the fund (83 percent of it going to the School Fund), but distributions have historically been low enough that the Permanent Fund has grown throughout the years.  (It must grow every year, of course, to keep pace with inflation and population growth.) 

Every year, the average market value of the Fund for the preceding five years is calculated and a distribution is made based on this average.  Senate Joint Resolution 6 changes the annual distribution from 4.7 percent of the Fund’s five-year average market value to 5 percent of the five-year average market value.  According to New England Pension Consultants (in an analysis done for the State Investment Council), a 5 percent annual distribution will result in a loss of more than 6.2 percent of the Fund’s real (present discounted) value.  It is unclear whether the endowment can be maintained at this distribution level.

Overall government revenue is unaffected.  The General Fund and other state funds will see a revenue increase of $16.124 million in FY04 and another $78.827 million increase in  FY05.  The Land Grant Permanent Fund will see equal and opposite revenue decreases.

The bill entails no explicit impact on taxpayers, though if the Fund is depleted, it may be necessary in the future to increase taxes or decrease spending.