This trend began during the pandemic when states unexpectedly had budget surpluses created by federal aid and strong sales and use tax revenue growth. Despite the economic uncertainties, numerous states have reduced personal and corporate income taxes and several states are still considering tax reductions this year. The governor’s veto runs counter to the tax cutting trend of the past three years. If the entire bill was approved by the governor, New Mexico taxpayers would have received over $1 billion in tax cuts. The omnibus tax bill would have been one of the most significant for both the state and nationwide to this date. The legislation would have limited that deduction to $1,000,000. Currently, a 40% deduction is allowed for taxpayers’ capital gain income. A growing number of states are exempting this particular retirement income from state individual income tax.įinally, there were changes proposed to the net capital gain deduction. In addition, the bill would have exempted social security payments from New Mexico income tax. The new brackets would have imposed the tax at a lower effective rate on some taxpayers by offering more brackets with a lower rate than what was currently imposed. Individual income tax changesĬhanges to the individual income tax include increasing the number of brackets for each filer from five to six. The bill proposed to eliminate the lower bracket completely, imposing the 5.9% rate on all corporate net income. The current corporate tax rate is imposed at a flat 4.8% for income of $500,000 or less, and 5.9% for income over $500,000. The bill also proposed changes to the corporate tax rate effective Jan. New Mexico would have been the third state to adopt single-sales factor this year after Montana adopted the apportionment change effective in 2025, and Virginia an expanded single-sales factor for certain retail groups. House Bill 547 would have generally adopted single-sales factor apportionment effective Jan. Local tax rates would have been unaffected by the legislation. However, the reductions would not have been automatic and required certain revenue triggers. House Bill 547 proposed to extend that reduction schedule through 2026, ultimately achieving a rate of 4.375%. Those reductions have been one of the few cuts to a state sales tax rate in the country in recent years. The rate is on a scheduled reduction from an original 5.125%. Tax changes vetoed Gross receipt tax changesĬurrently, the New Mexico state gross receipts tax (sales tax) rate is 5% through June 30, 2023, and 4.875% thereafter. The vast majority of the remaining portions of the bill were vetoed. Also approved was an expanded child tax credit and an expansion of the film tax credit. The governor approved one-time rebates of $500 for single filers and $1,000 for joint filers who filed an income tax return for the 2021 tax year. Included in the veto of the omnibus tax bill was a reduction of the state gross receipts tax (the sales tax), corporate and individual tax rate changes and adoption of single-sales factor apportionment. Michelle Lujan Grisham used her line-item veto on House Bill 547, preventing sweeping changes to the state’s tax code while leaving in place individual tax rebates. Executive summary Significant tax changes may have to wait
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