Lawmakers seek fair balance in tax code
Copyright © 2022 Albuquerque Journal
SANTA FE — Changes passed in recent years have made New Mexico’s tax code more progressive in some respects, but also made the state more dependent on taxes levied on the oil and natural gas industries and other sources. revenue, members of a key legislative panel said. said Wednesday.
Additionally, while an oil-driven revenue windfall is expected to continue for the foreseeable future, long-term government revenue growth may be insufficient to sustain current spending levels over the next 12-18 years. years, according to data from the Legislative Finance Committee.
The report was presented to lawmakers who plan to make further changes to New Mexico’s tax structure during next year’s 60-day legislative session.
Rep. Nathan Small, D-Las Cruces, said tax refunds and expanded tax credits for low-income New Mexicans approved over the past two years have reduced taxes for most state residents.
He also said the tax changes, along with increases in teacher salaries and more money for college scholarship programs, could eventually help diversify and grow the state’s economy.
“We have a particularly important window right now – and it’s not a window that will stay open forever,” Small told the Journal.
While the state has posted large budget surpluses in recent years due to soaring revenues, recent tax changes approved by lawmakers have reduced overall personal income tax revenue by approximately $957. million over the last three years, even with the creation of a new higher tax system. slice for the wealthiest New Mexicans.
Specifically, personal income tax revenue is expected to make up 23% of the government’s revenue base in the current fiscal year, but it would have been a much larger share of the total composition. revenue – about 30% – if the changes to the tax code had not been approved.
To compensate for the proportional decline in income tax revenue, gross tax revenue and tax revenue from the extractive energy industry now account for a larger share of the state tax base.
LFC assistant manager Charles Sallee told a meeting in Silver City on Wednesday that this was not necessarily a bad thing, as recent policy moves such as the creation of a state “day of rain” for years of cash has made New Mexico less vulnerable to large swings in income. .
However, he said the state’s approach to additional tax credits, refunds and other types of financial relief will need to be carefully considered.
“What is the right balance between the money circulating in the public sector and the money circulating in the private sector? said Sallee.
Even with tax refunds and other revenue-generating changes, including the exemption of Social Security earnings from taxes for most in-state residents, New Mexico state spending has increased dramatically. around 30% over the last four years.
Specifically, this year’s $8.5 billion budget signed by Governor Michelle Lujan Grisham will set a spending record and represent a 14% increase over last year’s spending levels.
However, the average spending growth of 4.2% per year over the past six years is in line with the state’s revenue growth over the same period, according to LFC data.
Much of the state’s revenue growth has been driven by a surge in oil prices and production in southeastern New Mexico, as the state overtook North Dakota last year. North to become the nation’s second-largest oil producer — trailing only Texas.
Legislative Finance Committee chief economist Ismael Torres said oil and natural gas levels are unlikely to start falling significantly for several years – likely until 2029 or later. .
He also said recent tax changes could lead to economic growth that could – in the future – offset short-term revenue reductions.
However, Richard Anklam of the New Mexico Tax Research Institute said that while the state’s tax code is generally in a decent state, the state’s current tax largesse won’t last forever.
“It’s good when things are going well…but it doesn’t stay that way,” he said.