New Mexico governor slashes taxes as she pursues reelection
SANTA FE, N.M. (AP) — Democratic Gov. Michelle Lujan Grisham signing a package of tax rebates, credits and rate reductions worth about $530 million in the initiative’s first year and urged congressional leaders to suspend taxes on gasoline in response to surging fuel prices.
Lujan Grisham signed the tax legislation hours after President Joe Biden announced his decision to cut off Russian oil exports in response to Russia’s invasion of Ukraine.
New Mexico, the nation’s No. 2 producer of crude oil behind Texas, is experiencing a windfall in state government income tied to oil and natural gas production through a variety of taxes, royalties and lease sales as energy prices surge.
“We should be looking at relief in any place that we can,” said Lujan Grisham, who signed a letter with five other governors that urges Congress to suspend federal gasoline tax collection through the end of the year.
Under the state legislation signed Tuesday, New Mexico will deliver one-time tax rebates of $250 for individuals who file taxes in New Mexico for 2021, or $500 for joint filers. The reforms also narrow the state’s tax on Social Security to high-income retirees while offering a per-child tax credit of up to $175 and slightly reducing taxes on retail sales and business transactions, among other provisions
Lujan Grisham said state tax changes will help local households offset rising retail gasoline prices, and that she has convened Cabinet advisers to study ways to provide additional relief.
“I don’t know what that looks like” yet, the governor said. “You can’t get to work if you can’t pay for gas, you can’t take grandparents and children to the doctor or school.”
New Mexico is among a dozen states that tax Social Security benefits. The new tax changes restrict state taxes on Social Security income to retirees who make more than $100,000 a year, or joint tax filers who report more than $150,000 in annual income.
State gross receipts tax on retail sales and business services will decline in two stages to about 4.9%. Combined state and optional local gross receipts taxes can reach a combined rate of nearly 9%.
The tax relief bill also gives $1,000 credits to full-time hospital nurses for the 2022 tax year, and provides a new tax exemption on military pension benefits, a credit toward households that install solar equipment to generate electricity and waives sales taxes on the purchase of feminine hygiene products such as tampons.
The one-time tax rebates are expected to cost the state about $312 million. With the tax reforms fully phased in, the state will forgo about $400 million in annual revenue that it would have collected otherwise without the reforms.
Across the nation, state lawmakers in blue and red states are proposing to cut taxes and fees as budget surpluses swell, though warnings have emerged that U.S. inflation and Russia’s invasion of Ukraine will change the outlook for public finances.
New Mexico’s tax relief bill moved through the Legislature with bipartisan support in the final hours of an annual legislative that adjourned on Feb. 17, though some Republicans favored even larger tax cuts.
The Legislature approved a $1 billion spending increase under a $8.5 billion general fund budget proposal for the year starting on July 1. Lujan Grisham has until Wednesday to sign the plan with veto authority over any provisions.