After a vigorous debate and much input from big business lobbyists and advocates for social services, healthcare and education, the House Taxation and Revenue Committee on Monday approved a measure that would levy a 1.5 percent surtax on wealthy New Mexicans.
Specifically, the surtax would affect single state tax filers who make more than $133,000 in taxable income, married separate filers who make more than $100,000 in taxable income and married joint filers who make more than $200,000 in taxable income.
If approved, the tax would sunset after three years.
The original proposal, HB 9, was brought to the committee by Rep. Ed Sandoval, who said the move is painful but necessary for the state to be able to provide vital services to its residents.
Rep. Ben Rodefer moved to amend the amount of the surtax to 1.5 percent. It’s been estimated that levying a 1 percent surcharge would generate about $48 million – a 1.5 percent change would generate about $74 million.
Speaker Lujan spoke strongly in favor of the 1.5 surtax.
“People recognize the need for additional revenue if we are going to keep viable services,” said Lujan.
A number of lobbyists for various businesses interests spoke strongly against the measure, including Art Hull from the Association of Commerce and Industry, Terri Cole from the Greater Albuquerque Chamber of Commerce.
Hull argued that wealthy people tend to spend their money on goods and services that benefit New Mexico. They also make investments and donate to charitable organizations. Raising the tax would cause the well-off to cut back on hiring and salaries, not to mention to reduce charitable donations to the very organizations that are advocating for the tax hike.
“It is easy for us to stereotype high-income individuals as people who hide their money away in jars and mattresses, and as people who have unduly benefitted from tax breaks,” said Hull. “We need to be careful to not assume that these are just wealthy people with extra money laying around.”
Later in the meeting, Speaker Lujan directly addressed Cole, asking her if she’d heard about last week’s referendum in Oregon that saw people approving tax increases for corporations and wealthy Oregonians.
Cole told Lujan she’d heard of the election.
“I think when people recognize that there is a need for revenue to sustain the viability of education and other needs, they are willing to tax themselves a little bit,” Lujan replied. “When the referendum (to raise taxes) went to the people, the people passed it.”
Rep. Rodefer also spoke in favor of the amended measure.
“When times were good, we gave these people tax breaks. And if you look at the measure, these people will still be paying significantly less than were before they got the tax breaks in 2003, he said. “And we were fine. Businesses didn’t shut down or stop hiring. We succeeded. “
In the end, the amended measure passed by vote of 10-6 along party lines.
Stay tuned to this spot or track the progress of HB 9 at the New Mexico Legislature web site.
In the meantime, check out this quote from Nobel Prize-winning economist Joseph Stiglitz about how high-income families tend to spend their money:
“Every dollar of state and local government spending enters the local economy right away, generating a greater economic impact. The impact is especially large when the money goes for salaries of teachers, policemenand firemen, doctors and nurses and others that provide vital services to our communities.” In contrast, “raising taxes on high income households also will reduce spending, but by less than the amount of the tax increase since those with plenty of income typically spend only a fraction of their income – and some of what they spend is spent on luxury goods made abroad.” Furthermore, lower-income families tend to spend more of their incomes locally than higher-income families.”