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F I S C A L I M P A C T R E P O R T

SPONSOR Jennings

ORIGINAL DATE

LAST UPDATED

2/6/08

HB

SHORT TITLE Personal Exceptions Tax Credit

SB 526

ANALYST Francis

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

500.0

Nonrecurring General Fund – TRD

budget

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

(47,300.0)

Nonrecurring General Fund

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 526 creates a one time tax rebate for New Mexico taxpayers that must be paid out by

December 15, 2008, by the secretary of TRD. The rebate changes value with income and the

number of exemptions as shown in the table below:

Senate Bill 526 – Page

2

Over

But not over:

1

2

3

4

5

6

$0 $10,000

$56

$88 $108 $120 $133 $140

$10,000 $20,000

$52

$80 $101 $112 $119 $123

$20,000 $35,000

$49

$73 $91

$98 $102 $106

$35,000 $45,000

$46

$67 $81

$88

$91

$95

$45,000 $60,000

$28

$39 $46

$49

$52

$55

$60,000 No Limit

$24

$32 $39

$40

$42

$45

Adjusted Gross Income:

Number of exemptions:

There is an emergency clause and so will take effect upon signature of the Governor.

FISCAL IMPLICATIONS

According to TRD, data from 2006 tax year returns multiplied by the credit amounts shown

above were the basis of the $47.2 million impact estimate shown above. Slightly less than $46

million would be paid to taxpayers based on tax year 2006 returns. This figure was increased by

the forecast 1.4% annual population growth to generate the estimate for FY09.

SIGNIFICANT ISSUES

This rebate is identical in form to the tax rebate approved in 2005 at the 2005 special session.

Only the value of the credit has changed. That credit was designed to help New Mexicans cope

with high gasoline and heating prices with the surge in energy prices following the Katrina and

Rita hurricanes in the Gulf of Mexico. Now, there are many indications that the economy is

slowing down and the national economy is either in recession or very near to it. Combined with

the crash in the housing markets and declines in manufacturing employment, the economic

conditions are such that consumers may ratchet back their expenditures and have difficulty

paying bills.

The table below shows the distribution of the rebate.

TRD Analysis of the Distribution of the Credit, by Income Class

(Based on Tax Year 2006 Data)

Number of

Returns Total (000) Average

Under $10,000 155,259

$10,843

$70

$10,000-$20,000 144,555

$10,530

$73

$20,000-$35,000 159,404

$11,014

$69

$35,000-$45,000 69,804

$4,477

$64

$45,000-$60,000 74,712

$2,878

$39

$60,000 or more 183,656

$6,232

$34

Total

1

794,769

$45,973

$58

Adjusted Gross

Income

Proposed Credit

1

Returns with negative AGI are excluded from the lowest income

g

rou

p

but included in the totals.

Senate Bill 526 – Page

3

ADMINISTRATIVE IMPLICATIONS

TRD was able to process and deliver all of the 2005 rebates in a matter of months within the

$500 thousand appropriation the agency received at that time. There is more time in this bill for

them to process and so should not be an administrative burden.

TECHNICAL ISSUES

The bill allows TRD till December 15, 2008, to process rebates and if the economy slows it is

more likely to slow earlier this year than at the end of the year.

NF/jp