A bill that would reduce personal income taxes across the earnings spectrum and collect more taxes on investment income passed the Democratic-led New Mexico state House on Wednesday.
The broad package of tax changes won House endorsement on a 48-21 vote and now moves to the Senate for consideration.
State government would forgo about $105 million annually overall through adjustments to personal income tax rates and brackets while collecting more taxes on investment income.
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All income tax payers would see a decrease, with the greatest savings in dollar terms among middle-income earners, according to an analysis by the state Taxation and Revenue Department.
Annual income tax would decrease by $16, or 12%, to $136 for a couple with taxable income of $8,000, the agency said. A wealthier couple with an annual taxable income of $400,000 would save about $553, or 2.8%, on annual taxes of $20,042.
The bill from Democratic state Rep. Derrick Lente, of Sandia Pueblo, also includes tax credits and deductions aimed at shoring up the medical workforce in remote rural areas and easing the fiscal burden on child care and preschool providers.
He said in a statement that the bill aims to “improve access to healthcare and childcare, support clean energy, and provide support for our friends and neighbors who need it most.”
The bill would incentivize the construction of large-scale energy storage projects — which can make renewable wind and solar energy production more useful — by reducing local government taxes on the facilities through the use of industrial revenue bonds.
Proposed changes for businesses would set a flat 5.9% rate for the corporate income tax at companies with less than $500,00 in annual income.
New Mexico residents who saw their homes destroyed in recent wildfires would be eligible for new income tax credit.
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A statement from House Democrats says the bill reduces a cap on capital gains tax exemptions to $2,500 — limiting a tax break “that overwhelmingly benefits the state’s highest earners.”
House Republicans led by state Rep. Jim Townsend, of Artesia, unsuccessfully proposed more aggressive tax cuts in light of an estimated $3.5 billion general fund surplus for the coming fiscal year. In a failed amendment, he suggested a flat 1% tax on personal income.
Current rates range from 1.7% on taxable income under $4,000 for individuals to 5.9% on annual income over $157,000.