Taxes could rise on gas, cars, homes

Staff and Wire Reports

Staff and Wire Reports
SANTA FE — A tax reform commission has recommended no change in the tax on food but proposed higher taxes and fees on gasoline, motor vehicles and homes.
The Blue Ribbon Tax Reform Commission voted 16-7 on Tuesday to approve a package of tax change recommendations, which go to Gov. Bill Richardson and the Legislature. Six of 10 legislators on the panel supported the package.
At a Portales City Council meeting in September, council members adopted a resolution against a proposed elimination of taxes on groceries, which the Blue Ribbon Committee was considering.
City Council members said the city’s budget would lose about $424,000 annually had the reduction gone through.
The governor plans to call a special session of the Legislature starting Oct. 27 to consider the tax changes. However, Richardson said the overall package ‘‘does not have my endorsement.’’
The panel recommended both tax cuts as well as increases.
Overall, the commission’s proposals would provide a net revenue increase of about $151 million to the state once fully implemented. Of that, about $96 million would be earmarked to the fund that pays for highway construction and maintenance — providing a way to finance a proposed road improvement package advocated by Richardson.
The commission voted to make no changes in the current gross receipts tax on food purchases rather than repealing or reducing it.
Richardson said he was ‘‘disappointed’’ by the panel’s recommendation on the food tax. The governor had wanted the tax lifted from food and medical services.
Among the commission’s recommendations:
l Increasing the tax on gasoline by 2 cents a gallon and 3 cents a gallon on diesel fuel. Currently, the tax is 17 cents on gasoline and 18 cents on diesel. The taxes also would be indexed for inflation, which would mean automatic increases in the future.
l Raising the excise tax on purchases of motor vehicles to 4.5 percent from 3 percent. A portion of the increase, one-half of a percent, would be earmarked for highway financing.
l Increasing registration fees for cars, trucks and other motor vehicles by an average of $12.50 a year. The actual increase would vary depending on the vehicle. Currently, the fee averages about $38.
l Impose a new property transfer tax on the sales of homes over $100,000. A sliding scale tax would apply, ranging from 1 percent to 2 percent.
l Phase out a newly enacted capital gains deduction for higher income New Mexicans. Richardson pushed through the capital gains deduction earlier this year as part of a five-year, $360 million income tax cutting package.
l Reducing taxes for lower income and some middle income New Mexicans. The current Low Income Comprehensive Tax Rebate, or LICTR, would be expanded and the personal exemption would be increased for lower and middle-income taxpayers.
l Provide tax relief for health care providers; establishing a tax deduction so they don’t have to pay the gross receipts tax on reimbursements from managed care companies and some Medicaid payments.
l Lowering the corporate income tax, creating a two-tier system with a top rate of 6.4 percent rather than 7.6 percent.
l Raise the gross receipts tax by one-eighth of a percent. That’s done by reducing a credit the state currently provides to municipalities.
Another proposal would give counties more authority to raise gross receipts taxes without voter approval of the higher levy. Local governments also would be able to impose a local option ‘‘compensating tax’’ on some out-of-state purchases. Overall, the commission’s package would cause very little net change in revenues flowing to local governments next year.
At one point, the commission voted to raise liquor taxes by about $38 million but later reversed that decision after House Speaker Ben Lujan, D-Santa Fe, asked for a recount.
Richardson said he opposed the rollback in the capital gains reduction and the proposed increases in the gas tax and creation of a property transfer tax. The governor said he supported proposals that were intended to reduce ‘‘pyramiding’’ of the gross receipts tax on business transactions and the proposals for tax relief for lower and middle income taxpayers.
The commission chairman, Jerry Sandel, a former Democratic legislator from Farmington, said he doubted that any commission member supported all of the recommendations but he described the package ‘‘as a good step forward.’’
‘‘It’s economic development. It’s reform. It’s equity,’’ said Sandel.
Fred Nathan, of Santa Fe, a long-time advocate of lifting the tax on food, voted against the package.
‘‘The commission failed to repeal the tax on food while imposing more than $100 million in new taxes on working middle class families, including new taxes on their homes, gas and cars. That’s wrong,’’ Nathan said after the meeting. ‘‘I would strongly urge Gov. Richardson to develop his own tax reform package.’’