Income tax hike proposal wins approval at eleventh hour

SANTA FE — A proposal to raise income taxes on high-earning New Mexicans — as part of a broader tax package — won approval in the final minutes of the 2019 legislative session.

The last day also included final passage of legislation for a new ethics commission and a proposal to decriminalize the possession of small amounts of marijuana.

The tax package was a product of 11th hour negotiations between lawmakers and top officials in Gov. Michelle Lujan Grisham's administration. It passed the House on a voice vote Saturday morning, and the Senate approved it 23-18 about 15 minutes before adjournment.

It creates a new higher personal income tax bracket of 5.9 percent for individuals who make more than $210,000 annually. It would also apply to high-earning married couples filing jointly.

But the new income tax bracket would only be implemented if state revenue levels in the coming year remain at close to current levels.

Rep. Javier Martinez, D-Albuquerque, said the changes would make the state's personal income tax code more progressive 16 years after former Gov. Bill Richardson signed into law a broad personal income tax cut.

"One of the top priorities was to bring more progressivity to the personal income tax code," Martinez said.

The tax package would also impose a tax on Internet sales and nonprofit hospitals, while increasing the cigarette tax rate and imposing a new tax on vaping products.

In addition, it would expand an existing tax break for working families and create a new tax deduction aimed to offset the state-level impact of 2017 federal tax changes.

Critics of the legislation, House Bill 6, described it as a tax hike disguised as tax reform.

"I feel like we're in the position of raising taxes right now because we're spending too much money," said Rep. Jason Harper, R-Rio Rancho.

This year's legislative session was the first for newly elected Democratic Gov. Lujan Grisham — who successfully pushed for passage of a complex energy legislation, a higher minimum wage, two gun-control measures and a new early childhood department.

Lawmakers also sent her a $7 billion state budget that would sharply ramp up spending on public education to address a 2018 court ruling that found New Mexico is failing to provide a sufficient education to all students.

Some of the governor's priorities didn't survive the session. Moderate Democrats in the Senate joined with Republicans to block proposals to repeal a 1969 anti-abortion law and to withdraw more money from New Mexico's largest permanent fund for early childhood education programs.

Among the bills passed in the final hours of the session was a measure that would reduce penalties for possession of small amounts of marijuana.

The state would impose a $50 fine on someone caught with up to a half an ounce of marijuana under Senate Bill 323, sponsored by Sen. Joseph Cervantes, D-Las Cruces. It would be a civil citation, not a criminal conviction.

A proposal to legalize recreational marijuana sales through state-run stores died with adjournment of the session.

The governor has until April 5 to sign or veto legislation passed in the final days of the session.