The tax bill includes corporate income tax cuts, instituting a single sales factor and a number of other business-friendly provisions. Martinez referred to the bill as a “jobs bill.”
Martinez had asked for an even more expansive corporate tax cut; this bill will eventually lower the corporate tax rate to 5.9 percent. Martinez wanted the corporate income tax rate to be dropped to 4.9 percent, equal to the highest personal income tax rate.
“Thanks to a willingness to work together and compromise, we were able to pass a major tax reform bill that lowers the tax we levy on businesses to a rate that falls below the national average, ends penalties on manufacturers who want to create jobs here in New Mexico, and moves us forward in a way that reduces our state’s dependence on the federal government during very uncertain budgetary times in Washington,” Martinez said in a statement following the signing.
Progressive groups were critical of the package and said it was a gamble.
“HB-641 is bad for New Mexico,” said Veronica C García, Ed.D., Executive Director of New Mexico Voices for Children. “Giving tax breaks to corporations with no performance accountability attached to them will not serve the interests of New Mexico’s children and working families. These tax-cuts-for-jobs schemes are known to be ineffective at creating jobs and growing an economy that works for everyone.”
The bill will also have an effect on local governments. The bill ends the “hold harmless” provision where the state reimbursed local governments for their share of the food and medicine taxes. This will be phased in over 15 years, with a two-year grace period for the local governments to get ready for the changes.
“What this bill does guarantee is that the state will have tens of millions of dollars less for education, public safety, and health care,” said Gerry Bradley, Senior Researcher and Policy Analyst for NM Voices for Children. “Another provision in the bill will cost local governments $26 million by fiscal year 2017. Cities and counties will be either be forced to pass the cost along to working families, or cut services like fire and police protection,” he added.