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| SPONSOR: | Kysar | DATE TYPED: | 02/11/99 | HB | |||
| SHORT TITLE: | Capital Gain Income Deduction | SB | 348 | ||||
| ANALYST: | Taylor | ||||||
| Subsequent
Years Impact |
Recurring
or Non-Rec |
Fund
Affected | ||
| FY99 | FY2000 | |||
| N.A. | $ (45,900.0) | $ (43,800.0) | Recurring | General Fund |
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicates/Conflicts with/Companion to/Relates to SB-290
SOURCES OF INFORMATION
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
Senate Bill 348 would allow taxpayers to deduct fifty percent of income from capital gains for state income tax purposes. Husbands and wives filing separate returns and who could have filed a joint return would each be allowed to deduct one-half of the capital gains deduction. Taxpayers earning income in New Mexico and other states would apportion the deduction based on rules to be developed by the Taxation and Revenue Department Secretary.
The capital gains deduction would become effective on January 1, 1999. The effect on income tax revenues would begin in FY 2000.
FISCAL IMPLICATIONS
TRD has estimated that the exemption would lower FY2000 general fund revenues by $46 million. The revenue loss in the following year would be $44 million. They developed the revenue impact based on expected capital gains realizations of $1.2 billion and an average capital gains tax rate of 7.65 percent (600 million, or half of the 1.2 billion in capital gains, multiplied by .0765 equals $47 million). TRD says that the state would actually see about 97.5 percent of that, or $46 million. The estimate for the following year is lower because state income taxes are deductible from federal income taxes in the following year, thus effectively decreasing the tax base.
ADMINISTRATIVE IMPLICATIONS
TRD says that there would be some immediate administrative impact, but that they could be handled within the current budget. Auditing requirements would increase too, but that could be handled in later years' budgets.
BT/njw