Friday, March 05, 2010Food Tax: Can It Undo Dems? Special Session Aftermath Analyzed, Plus: More On Santa Fe's Tax Plans For You![]() Every political consultant worth his reel of 30 second TV spots warned that the food tax is lightning in a bottle, and coming in a year when populism is rising and incumbents of every stripe are ripe for tar and feathering, it could very well tip the political balance come November. Big Bill can hear the footsteps if not yet see the pitchforks of the hungry crowds. He said upon conclusion of the four day session: I deeply regret that revenue increases became an option. I am especially concerned that the Senate insisted on including a food tax, which is regressive and hurts working SAY WHAT DI? But ignoring the elephant in the room has never made it go away and Denish and the Democrats are now not only exposed on the ethics issue, but ready to be had on the issue that will ultimately decide the Guv race--the economy. Legislators made a tepid move toward sharing the budget pain with the highest wage earners in the state (who, by the way, will mostly be voting Republican) but it doesn't appear to be enough to fade the heat over their taxing of the working classes that compromise the heart and soul of the state Democratic Party. (Besides the food tax, lawmakers approved a 1/8 cent increase in the overall gross receipts tax which hits lower income earners more than higher earners.) In December, former GOP Chairman John Lattuzio wrote to us of that 1994 election year. His words bear repeating because we could have some political Déjà vu: A campaign was created by the NM GOP to repeal the six cents per gallon gas tax. My best estimate of the total cost was about $1,000. Just prior to the election, a barbecue was held in Belen that attracted close to 1,000 people. They all raised their hands and joined the ‘Posse’ organized to defeat the ‘Gas Tax Gang. The campaign was driven by the party faithful, and received more earned media for a campaign of this type than I had ever experienced. Henry Ford once famously said: "History is bunk." Perhaps. But that doesn't stop it from repeating. GRADING THE SESSION ![]() If we are going to make prayer a central tenet of state budget planning, the least the Santa Fe pack could do is own up to it and call in the Hopi snake dancers for help in making it rain dollars from our turquoise colored skies. HUNGRY PACKARD We did take notice that a $6 million cash outlay to Hewlett-Packard made its way from the lawmakers and on to the Guv's desk. That's to help the computer giant open up its Rio Rancho call center where it says it will employ over a thousand. With HP having $12 billion in the bank and the state facing a $600 million shortfall, you might think the corporate giant would have thrown the state a bone by rejecting this latest round of millions. Okay, stop that chuckling. TAX MAZE ![]() Reader and attorney Helen Hecht, tax counsel for the Federation of Tax Administrators, reacted to Carol's email in DC and came with this:
The provision (approved in the special session) would require that a taxpayer who itemizes add back the state income tax that is deductible for federal tax purposes before computing tax on that income for NM. The reader said she made 1/3 of $100,000 in (taxable) income...Her NM tax amount would be a maximum of $1,355 using tax tables from last year to calculate her tax, assuming she is single. (You have to use the tax tables because NM's tax rate ranges between 1.7% and 4.9% and that makes a big difference here.) That $1,355 is the amount that she can deduct for federal tax purposes and that she would have to add back for state tax purposes. Since the incremental tax rate (for income over the $33,333) would be 4.9%, the additional tax on the $1,355 add back would be $66, not $308. Since she's paying slightly more in state taxes, she would get a slightly greater deduction for federal tax purposes next year and would end up paying a little less in federal taxes as well so the actual out-of-pocket amount would be something less than the $66. Contrast this with someone who has $100,000 in taxable income. Their state tax add-back would be about $4,618. Their additional NM tax would be $226, about three and a half times more than what the reader would pay. And Richard Anklam of the NM Tax Research Institute also concluded, like Helen, that Carol would owe in the $60 range, not over $300. He emailed: Make no mistake, the add-back is a tax increase...but the vast majority of states require the add back of state taxes. The argument is the Fed’s don’t allow you to deduct federal income taxes paid, why should the state allow you to deduct state taxes? It’s also progressive in that it’s tied to state income taxes paid, which is of course tied to income. The more you make the more likely you are to itemize. The more you benefit from that the more you’ll be impacted by the proposal. Thanks to Helen and Richard for the tutorial (we feel like we just were forced to eat our Brussels Sprouts). Middle income Carol will still end up with a slight tax increase. although not as much as she feared. Wouldn't it have been more equitable for the Legislature to have adopted a surcharge exclusively on only high wage earners? Or increase slightly the tax rates on the wealthiest taxpayers that were rolled back so much in 2003? The answer is yes and yes. THE BOTTOM LINES ![]() I really don't think Big Bill is going to have much to do with Hollywood, big bucks and all. I think he wants to tour baseball stadiums throughout the country because he has his eye on becoming the Commissioner of Baseball. Big Bill wants to go out with a bat and glove in his hand, not some movie tickets! Thanks for your company this week. Let's do it again soon. From Albuquerque, I'm Joe Monahan reporting. Email your news and comments. (c)NM POLITICS WITH JOE MONAHAN 2009 Not for reproduction without permission of the author |
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