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| SPONSOR: | Coll | DATE TYPED: | 3-12-99 | HB | House Memorial 38 | ||
| SHORT TITLE: | Reinstate Federal Income Tax Deduction | SB | |||||
| ANALYST: | Taylor | ||||||
Duplicates/Conflicts with/Companion to/Relates to
SOURCES OF INFORMATION
Taxation and Revenue Department
SUMMARY
Synopsis of Memorial
House memorial 38 requests the New Mexico congressional delegation to introduce legislation to reinstate the federal income tax deduction for state sales and gross receipts taxes. The memorial cites the federal surplus as evidence that the federal government can afford to restore the deduction.
Significant Issues
The memorial notes that because the Internal Revenue Code allows taxpayers to deduct state income taxes and property taxes but not sales taxes, New Mexicans have to pay relatively more in federal income taxes than do taxpayers in other states that do not rely as heavily on sales or gross receipts taxes. This violates the taxation principle that taxpayers of similar circumstances should be taxed the same (horizontal equity).
FISCAL IMPLICATIONS
The Taxation and Revenue Department reports that about 50 percent of gross receipts taxes are borne by households and would be deductible if the deduction were reintroduced. They say that reinstating the deduction would save taxpayers $38 to $39 million per year. $31 million of this would be federal income tax savings and $7 to $8 million would be savings to state income taxes. (State taxes would decrease because the state's income tax system piggy backs on the federal system.)
ADMINISTRATIVE IMPLICATIONS
TRD reports that even if the federal government made the requested change, there would not be any administrative impact.
BT/njw