BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  2

DATE:  March 9, 2001	Submitted by: TAXATION AND REVENUE DEPT.       
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER:  HB-93 as amended by the House Voters and Elections Committee (2/1/2001),
	 the House Judiciary Committee (2/14/2001)
	 and the House Appropriations and Finance Committee (03/01/2001)
SPONSOR:  Representative Lujan

BILL SHORT TITLE: Public Campaign Finance Option Act

CONFLICTS, DUPLICATES, COMPANIONS:  SB-39 as amended

DESCRIPTION:  The department’s review of this bill is limited to Sections 10, 18, 19 and 20.

A new Personal Income Tax check-off program would be created, allowing taxpayers to redirect $5 ($10 for married persons filing jointly) of their state Personal Income Tax liability to the Public Election Fund.  A new Personal Income Tax deduction would be allowed for direct contributions of up to $250 ($500 for married persons filing jointly) to the Public Election Fund.  None of the house committee amendments (HVEC, HJC, and HAFC) altered Sections 10, 18, 19, or 20.

EFFECTIVE DATE:  July 1, 2001;  The Personal Income Tax check-off and deduction are applicable to tax years 2001 and subsequent tax years.

FISCAL IMPACT (Thousands of dollars)   Parenthesis ( ) indicate a revenue loss:

Estimated Impact on Revenues    	Recurring or		
			Nonrecurring	Funds	
	(FY 2001-2002)	(FY 2002-2003)	     Impact     	         Affected         	
$5.00 Tax Check-off:	610  to  790	630  to  815	Recurring	Public Election Fund	
“       “       “    	(610) to (790)	(630) to (815)	Recurring	State General Fund	
					
Tax Deduction	*	*	Recurring	Public Election Fund	
“        “     	(*)	(*)	Recurring	State General Fund	

Participation in the federal Presidential Election Campaign Fund check-off program declined from 20% of tax returns for tax year 1990 to 12.6% for tax year 1995, 12.4% for 1996, 12.3% for 1997 and the preliminary number for tax year 1998 is 11.4%.  Over that time, there was a consistent average of 1.43 check-offs for each return showing at least one election contribution.  Assuming New Mexico taxpayers would exhibit similar behavior for a state election campaign fund contribution program, about 88,000 to 114,000 state tax returns could be expected to show some contribution to a state election campaign fund and the average contribution would be $7.15 per tax return.  The fiscal year 2002 revenue impact shown is slightly less than the full year impact because only 97% of all tax year returns are processed during the January through June period.

*  It is uncertain how much the tax deduction for contributions to the Public Election Fund would cost the State General Fund, but the cost is expected to be small.  For every $100 contributed to the Public Election Fund, the State General Fund would lose about $7.  The contributor would save about $7 in state taxes and probably owe an additional $1.75 in federal taxes if the contributor itemized deductions, for a net tax benefit of $5.25 per $100 contribution.  This is not sufficient incentive to stimulate substantial contributions. 

ADMINISTRATIVE IMPACT:  A significant negative administrative impact on the department would result from required changes to tax forms and computer processing systems to accommodate the new check-off and deduction. These changes can be accomplished with existing resources, but will present a significant opportunity cost to other initiatives and improvements to the department’s Personal Income Tax computer system.

OTHER IMPACTS AND ISSUES:

•	There is no provision allowing low income filers who have no tax liability to contribute any portion of their refund to the Public Election Fund.

OTHER IMPACTS AND ISSUES (continued):

•	To prevent confusion between the two programs, it might be a good thing to repeal the existing check-off for political parties.  The current check-off allowing taxpayers who are due tax refunds to contribute $2 of their refund to the political party of their choice has proved to be extraordinarily unpopular.  Political party contributions are made on fewer than 1,000 tax returns, or about 0.15% of the number of returns which are due a tax refund.  That contribution program does, of course, come out of the taxpayer’s pocket in the form of a decreased tax refund.

Participation in the federal Presidential Election Campaign Fund check-off program declined from 20% of tax returns for tax year 1990 to 12.6% for tax year 1995, 12.4% for 1996, 12.3% for 1997 and the preliminary number for tax year 1998 is 11.4%.  This contribution program does not cost taxpayers anything since the contribution is a redirection of tax liability already paid.