[1] NOTE:  As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

 

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F I S C A L   I M P A C T   R E P O R T

 

 

 

SPONSOR:
Burpo

 

DATE TYPED:

01/24/02

 

HB

166

 

SHORT TITLE:

Reduce Personal Income Taxes

 

SB

 

 

 

ANALYST:

Smith

 

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY02

FY03

 

 

 

 

($31,980.0)

 

Recurring

General Fund

 

(Parenthesis ( ) Indicate Revenue Decreases)

 

SOURCES OF INFORMATION

 

Taxation and Revenue Department (TRD)

 

SUMMARY

 

Synopsis of Bill

 

This measure would reduce New Mexico personal income tax rates in a way that would provide tax decreases averaging 3 percent for New Mexico taxpayers. Threshold amounts for tax rate brackets would not be modified

 

FISCAL IMPLICATIONS

 

The estimate shown overstates the decrease in General Fund revenue by approximately 5% due to the "state deduction recovery".  Because state taxes are deductible from federal taxable income for taxpayers who itemize deductions, and state taxes “piggyback” on the federal income measure, state taxes are effectively deductible from their own tax base.  In this case, when state tax liability is reduced, the amount deducted from taxable income is reduced, with the result that liabilities increase slightly, thus offsetting a portion of the initial reduction.

 

 

 

 

 

OTHER SUBSTANTIVE ISSUES

 

TRD makes the following comments:

 

The proposed measure would provide the largest absolute reduction in taxes to individuals with taxable incomes in excess of $75,000 annually. However, the greatest percentage reduction in taxes would accrue to individuals with taxable incomes below $15,000. The total reduction in taxes per return would be approximately $54. The personal income tax currently generates approximately $1 billion annually. Since the state's population is currently roughly 1.8 million, personal income tax obligations average roughly $555 per person statewide. The proposed measure would reduce this figure by approximately $16.70.

 

SS/ar

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