BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  1

DATE: February 15, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER: HB-727

SPONSOR: Representative Gonzales

BILL SHORT TITLE: Increasing the $2,000 veterans exemption against property taxes to $6,000.

CONFLICTS, DUPLICATES, COMPANIONS: HJR-5, SJR-2

DESCRIPTION: The proposed measure would amend Section 7-37-5 NMSA to increase the current $2,000 veterans exemption against property taxes to $6,000.

EFFECTIVE DATE:  Not specified – assume 90 days after adjournment (June 15, 2001).

FISCAL IMPACT: The proposed measure would impose no significant impacts on state or local revenues for reasons explained below.
	Approximately 81,000 New Mexico taxpayers currently receive the veterans exemption. This number declined by about 500 taxpayers between the 1999 and 2000 property tax years -- probably due to the fact that many veterans are elderly and no significant armed conflicts have occurred in recent years. Since the exemption removes $2,000 per veteran from the tax base, approximately $162 million in total residential net taxable value ($81,000 x $2,000) is removed from tax roles as a result of the exemption currently. Since 1) relief provide by the exemption is the product of the tax rate and the exemption amount, and 2) the statewide average residential tax rate averages about $25 per $1,000 in net taxable value, relief provided by the exemption averages about $50 per veteran. Hence total tax relief provided by the exemption is approximately $4 million annually ($50 x $81,000). This figure is .55 percent of the statewide total $725 million in annual property tax obligations. Assuming no significant change in the number of veterans claiming the exemption or property tax rates, a $6,000 exemption would provide a total of roughly $12 million in property tax relief to veterans.
	The veterans exemption imposes almost no effect on property tax revenues because rates generally increase in response to loss in tax base caused by the exemption. Hence the exemption tends to shift the tax burden from individuals claiming it to individuals and businesses that do not receive it. 

ADMINISTRATIVE IMPACT: No significant administrative impacts would result from the proposed measure.

TECHNICAL ISSUES: Article 8, Section 5 of the New Mexico Constitution specifies that the veterans exemption is $2,000.  Without a change in this provision, this bill would be a nullity even if enacted.  

OTHER IMPACTS AND ISSUES: none.