$90 Million Tax Hit: HB 51

New Mexico and the economic developers trying to build the economy dodged a potential $90 million tax increase yesterday with the tabling of House Bill 51. The bill said, "A unitary corporation that is subject to taxation under the Corporate Income Tax and Franchise Act shall file a combined return with other unitary corporations as though the entire combined net income were that of one corporation."

What that means is that a company doing business in several states through separate corporations would have to pay corporate taxes on the whole operation, rather than on what is earned in New Mexico. It would have been a nice application of the adage of "tax the guy behind the tree." 

Santa Fe's very liberal Democrat Peter Wirth has offered the proposal for four years. For some reason, Brian Moore, Clayton Republican, cosponsored this year. Moore said little during the bill's presentation to the House Taxation and Revenue Committee.

Wirth came with his liberal ducks in a row including economist Gerry Bradley of Voices for Children (www.nmvoices.org) and an attorney from the Multistate Tax Commission (www.mtc.gov), which is currently chaired by Jan Goodwin, New Mexico Taxation and Revenue Department Secretary.

For the first time, bill proponents had linked the tax hike to children by directing the money to school spending. Thus, opposing the bill meant harming children, so they said.

Committee chair Rep. Ed Sandoval, Albuquerque Democrat, sought a show of hands from those in the audience favoring and opposing the bill. Opponents seemed to win that numbers battle, bolstered by the chance appearance of members of the New Mexico Industrial Development Executives (IDEA), in Santa Fe for a conference that included a seminar on participating in the legislative process. IDEA is the professional group of New Mexico economic developers. At the start of the seminar, IDEA members were told that HB 51 was on the agenda for the afternoon and then were told it was to be heard soon. The group dropped the seminar and headed for the Capitol.

Sandoval asked ten people from the audience to comment, five for one side and five for the other. Advocates seemed to be the standard Santa Fe anti-globalization, anti-competition types seeking purity and protection for their home market which just happens to be a world-class destination resort and therefore of appeal to "corporations." Opposition speakers tended to be senior lobbyists. They said collateral effects of changing one piece of the tax code were unknown, that the amount of money to be raised really was unknown, though claimed at $90 million, and that changing the corporate tax rules would deter companies from doing business in the state. One lobbyist cited an email of concern, received an hour before, from a firm that has just announced a major plant for the state.

As I left, House Speaker Ben Lujan had just finished a detailed and polite grilling of a lobbyist for Wal-Mart.

The bill might come back to life.