As usual, Albuquerque Journal cartoonist John Trever summarizes the situation perfectly with his cartoon from Sunday, April 19, 2023.
Here are a few notes about the final tax bill as line-item vetoed by Gov. Lujan Grisham. New Mexico had a $3.6 billion surplus going into the session. The Legislature originally allocated $1.1 billion for “tax cuts.” $1.2 billion of that $3.6 billion was for new spending. That means over $1 billion would have been set aside for the future. The point is that (contrary to MLG’s veto statements about having anxiety over future revenues) plenty of money was available.
To her credit, MLG vetoed all the tax hikes in the bill (corporate, capital gains, alcohol, and tobacco), not just the tax cuts.
Here are the so-called “tax cut” provisions approved by the Gov. in the final bill (we used the 2027 fiscal impact for the tax/spending bills):
- Film subsidies: $87 million by FY 2027. This is NOT a tax reduction. It is new spending;
- Health practitioner deductible/copay: $38.5 million (this is the one ACTUAL tax cut passed and signed);
- The Child Tax Credit: $111 million; While a small portion of this will indeed represent a tax cut, this is a very “progressive” and “refundable” credit (it is given whether you make money or not). We estimate $100 million of this is spending and only $11 million is an actual “tax cut.”
- $500 or $1000 tax rebates: The one-time “cost” of these rebates is $667 million.
So, here are the tallies for what happened to New Mexico’s $3.6 billion surplus:
1) $1.2 billion or 33% was spent (adding in film subsidies and refundable child tax credit as spending;
2) $667 million or 18.5 percent of the surplus was returned in the form of one-time “rebates.”
3) $50 million or 1.4 percent comes in the form of “recurring” tax cuts.