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

SPONSOR Lujan

DATE TYPED 10/9/05

HB 19/aHTRC

SHORT TITLE 2005 Tax Rebates

SB

ANALYST Francis

APPROPRIATIONS

Estimated Appropriations

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

($500)

Non-Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

($101,260)

Non-Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to HB10, HB13

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Summary of HTRC amendment

House Bill 19 was amended by the House Taxation and Revenue Committee to exempt the re-

bate amounts from state personal income tax. This would lower revenue by an estimated $800

thousand.

House Bill 19/aHTRC -- Page 2

Synopsis of Original Bill

House Bill 19 sets up a rebate on the personal income tax to be mailed out immediately to all

taxpayers by the secretary of the Taxation and Revenue Department (TRD). The intent of the

rebate is to mitigate the recent high costs of gasoline and the expected increases in the cost of

heating this winter. The rebate decreases as income rises and increases as family size increases.

The rebate is paid to any resident who files an individual NM income tax return and is not a de-

pendent of another individual, who was not an inmate of a public institution for more than six

months during tax year 2004 and was a resident on the last day of 2004. Additionally, residents

who do not receive rebates can claim it on their 2005 tax return provided they were not an inmate

of a public institution for more than six months in 2005 and were residents as of the last day of

tax year 2005.

FISCAL IMPLICATIONS

TRD estimates that the cost of the rebates is just over $101 million in direct payments adminis-

tered by the secretary of the Taxation and Revenue Department and $500 thousand in appropria-

tion for the administration of the payments. Though the bill does not state it explicitly the as-

sumption is that the appropriation for the rebate is out of the general fund. This includes the

revenue impact of the exempting the rebate from state income taxes which TRD estimates at $1.4

million.

The rebate is designed to provide all taxpayers with some relief. It is weighted towards larger,

low income families. The minimum rebate is $55 while the maximum is $280. The rebate is

based on adjusted gross income and exemptions declared on the 2004 returns.

The rebate decreases as income goes up and increases as exemptions go up. For one exemption,

like a single tax filer, the maximum is $130 while the minimum is $55 (see table).

Proposed Rebate Schedule

Adjusted Gross In-

come is:

And the total number of exemptions is:

Over But Not

Over

1

2

3

4

5

6

0

10,000

$130 $170

$205

$235

$260 $280

10,000 20,000

115

150

180

205

225

240

20,000 35,000

100

130

155

175

190

200

35,000 45,000

85

110

130

145

155

160

45,000 60,000

70

95

115

130

140

145

60,000

55

75

90

100

105

110

Using TRD estimates, the bulk of the rebates, over 70%, will go to taxpayers who have less than

$35,000 in adjusted gross income (see chart).

House Bill 19/aHTRC -- Page 3

Distribution of Rebates

0%

5%

10%

15%

20%

25%

30%

< 10k 10-20k 20-35k 35-45k 45-60k >60k

Fiscal impacts were estimated using information from personal income tax returns. The follow-

ing adjustments were made to reflect various provisions of the proposal:

• Non-resident taxpayers were excluded;

• Inmates of public institutions were excluded; and

• An estimate of the number of new taxpayers moving into the state during 2005 was added to

the population of resident taxpayers from the previous year.

ADMINISTRATIVE IMPLICATIONS

To process the rebates, TRD has estimated that this will cost $500 thousand to process and dis-

tribute the rebates to taxpayers. TRD expects they can complete the job and have all of the re-

bates mailed out by December 15

th

, 2005. While this estimate was provided for HB10, which

has lower rebate amounts, the processing should not be affected by the amount of the rebate.

NF/yr