Corporate Tax Loophole Closed But Watered-Down 

The bill closing a specific corporate tax loophole in New Mexico
finally passed out of the senate on Monday, but only after it had been
“carved up” in committee. Big-box retailers won’t get away with
sending profits out of New Mexico to avoid paying corporate income tax
here, but a lot of other super-sized businesses will still have that
option.

Sen. Peter Wirth (D-Santa Fe) has been sponsoring bills to end this
loophole for eight straight years. “Carved up” was his term for the
final, approved legislation. He said he’s still heartened to have
passed the measure, and believes it could be strengthened over coming
years.

“This is a great first step,” he said. “At least we’re talking tax policy.”

Sen. Eric Griego (D-Bernalillo) congratulated lobbyists for watering
down Wirth’s bill, and gave an impassioned speech in which he asked
his fellow senators “Is our job up here to look after multi-state
corporations and make sure they have the most favorable tax possible?”

Griego was trying to add an amendment which would have said all
corporations in New Mexico needed to pay the state’s corporate tax
(which is how Wirth initially wrote the bill). He mentioned hefty cuts
to public education, and wondered why lawmakers are more willing to
cut school funding than close loopholes that help banks horde their
money.

“I’m disappointed that this is supposedly the best we can do,” Griego
said. “My constituents don’t have as many lobbyists as the multi-state
corporations here. I want to congratulate them. We cut school
programs, we cut arts out of school. We even cut public safety. I hope
the folks from Wells Fargo… represented in this body appreciate
this.”

SB9 mandates a “combined reporting” requirement, so corporations would
not have the option of sending cash earned in New Mexico to a state
where there is no corporate income tax, like Arizona.

But rather than apply to all multi-state corporations operating in the
state, only “corporations providing retail sales in a facility of more
than 30,000 square feet under one roof” must file a combined return.
That amendment was added this weekend by members of the Senate Finance
Committee.

So big-box chain stores (like Walmart and Best Buy, though there’s no
knowing right now if they already filed combined returns or not) have
to pay New Mexico corporate taxes now. Companies which still don’t
have to file a combined return include manufacturers like Intel and
too-big-to-fail banks like Bank of America and Wells Fargo.

The corporate tax rate in New Mexico gets lowered, from 7.6 percent to
7.5 percent. Wirth had proposed dropping the rate to 7 percent, but
the Senate Finance Committee changed that figure at the same time it
was amending SB9 to only include huge retailers.

Sen. John Arthur Smith (D-Luna) is chair of the Senate Finance
Committee. He said the bill had to be amended because Fiscal Impact
Reports told him the dip in New Mexico’s corporate tax rate would
ultimately bring about a net loss in revenue for the state.

“I didn’t want to give the governor a tax cut,” he said, if it
ultimately loses money for the state.

Wirth disagreed with Smith’s assessment. He has said that by lowering
the rate at the same time as more companies are being asked to pay,
the bill as he initially proposed would have made millions for New
Mexico.

“This is an example of what we can do with our tax code when we
broaden the base, to bring in more taxpayers,” Wirth said. “We can
lower taxes.”

Only by a tenth of a percentage point, it turns out, once the finance
committee is through with their carving knives.

After the vote, a woman went to the senate chamber specifically to
thank Griego for what he said before his amendment to Wirth’s bill was
slaughtered in a 37-5 vote.

“Thank you from the bottom of so many people’s hearts,” he was told.

Griego lamented that the bill in its original form could have raised
$60 million to $80 million “for New Mexico’s schools,” according to
one fiscal impact report.

“This is about the dysfunction of the body,” he said.

He estimated 40 lobbyists – working for companies including Chili’s
and Wells Fargo – had been deployed to the Roundhouse to specifically
influence the vote on SB9.

A contingent of citizen lobbyists from groups all over New Mexico had
also fought to influence lawmakers into voting for the bill, and they
plan to continue that fight with the House of Representatives as SB9
shifts to that side of the Roundhouse, and in the years to come.

MoveOn.org coordinator Steven Mayes said 50 groups – including MoveOn,
labor unions, Money Out of Politics, Santa-Fe-based We Are People
Here, and others – were part of the effort, working to influence votes
through meetings and phone calls.

Before this year, Mayes noted, Wirth’s bill had never survived a
single committee. Even a “carved up” version is better than nothing.

“If that’s what it takes to get this passed through the senate and in
front of people’s consciousness, I think that’s a good thing,” Mayes
said. “Most people didn’t even know about this. Within a 30-day
session, we were able to gear up and do enough outreach to effect the
outcome.”

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