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Corporate Tax Loophole Closed But Watered-Down 

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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