BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  6

DATE:  February 26, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER: SB-766

SPONSOR: Senator Aragon

BILL SHORT TITLE: Personal Income Tax Reduction Package; Adjust Rates and Brackets.

CONFLICTS, DUPLICATES, COMPANIONS: comprehensive comparison of the various PIT reduction proposals is included as an appendix to this bill.

DESCRIPTION: This personal income tax reduction and restructuring bill includes no decrease in the top marginal rate from 8.2% , but the same zero bracket amount as in the Governor’s proposal (HB-235 and SB-124). This bill also provides for fractional decreases in rates for the lower and middle brackets.  The overall package drops over 65,000 returns from any liability, while lower income taxpayers receive an average 33% reduction and the top bracket taxpayers receive a 2% reduction from current tax levels. The average married taxpayer receives a $171 per family decrease in personal income tax, while singles and heads of household average $66 and $87 respectively.

EFFECTIVE DATE: applicable for tax years beginning on or after January 1, 2001.

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

		Recurring or		
Estimated Impact on Revenues	Nonrecurring	Funds 	
 FY 2002 	FY 2003	FY 2004   	     Impact     t     	             Affected          .             	
(64,300)	(68,100)	(69,800)	Recurring	General Fund	
	2,800	2,800	Recurring	State Deduction Recovery	
(64,300)	(65,300)	(67,000)	Recurring	Net General Fund	
	8,600	8,600	Recurring	Federal Deduction Recovery	
64,300	56,700	58,400	Recurring	Net Taxpayer Benefit	

The fiscal estimate for all PIT bills is estimated using a master spreadsheet that has been adjusted to conform to the five-year revenue estimate presented in December.

ADMINISTRATIVE IMPACT: minimal. Forms, tax tables and instructions are generated anew every year.

TECHNICAL ISSUES: on page 13, line 25, “7.7% “should be “8.2%”. Similarly, page 13, line 25, “$3,814” should be “$3,932”.   This fiscal analysis assumes these changes have been made.

OTHER IMPACTS AND ISSUES:
1.	 The five-year impact on the general fund, the U.S. Treasury and taxpayers is as follows:
	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006	
Gross General Fund	(64,300)	(68,100)	(69,800)	(71,600)	(75,500)	
State Deduction Recovery		2,800	2,800	2,800	2,800	
Net General Fund	(64,300)	(65,300)	(67,000)	(68,800)	(72,700)	
Federal Deduction Recovery		8,600	8,600	8,600	8,600	
Net Taxpayer Benefit	64,300	56,700	58,400	60,200	64,100	
2.	
 The following chart exhibits the proposed changes.

2001 Current Law Single Tax Table		2001 Proposed Single	
If Taxable Income is	Then tax		of Amount in		If Taxable Income is	Then tax		of Amount in	
Over	but not over	is	Plus	Excess of		over	but not over	is	Plus	Excess of	
0	5,500	0.00	1.7%	0		0	2,500	0.00	0.0%	0	
5,500	11,000	93.50	3.2%	5,500		2,500	6,000	0.00	2.0%	2,500	
11,000	16,000	269.50	4.7%	11,000		6,000	11,000	70.00	3.0%	6,000	
16,000	26,000	504.50	6.0%	16,000		11,000	16,000	220.00	4.5%	11,000	
26,000	42,000	1,104.50	7.1%	26,000		16,000	26,000	445.00	6.0%	16,000	
42,000	65,000	2,240.50	7.9%	42,000		26,000	42,000	995.00	7.1%	26,000	
65,000	and over  	4,057.50	8.2%	65,000		42,000	65,000	2,115.00	7.9%	42,000	
						65,000	and over  	3,932.00	8.2%	65,000	
											
2001 Current Law Married Joint Tax Table		2001 Proposed MFJ	
If Taxable Income is	Then tax		of Amount in		If Taxable Income is	Then tax		of Amount in	
Over	but not over	is	Plus	Excess of		over	but not over	is	Plus	Excess of	
0	8,000	0.00	1.7%	0		0	5,000	0.00	0.0%	0	
8,000	16,000	136.00	3.2%	8,000		5,000	10,000	0.00	2.0%	5,000	
16,000	24,000	392.00	4.7%	16,000		10,000	16,000	100.00	3.0%	10,000	
24,000	40,000	768.00	6.0%	24,000		16,000	24,000	280.00	4.5%	16,000	
40,000	64,000	1,728.00	7.1%	40,000		24,000	40,000	640.00	6.0%	24,000	
64,000	100,000	3,432.00	7.9%	64,000		40,000	64,000	1,520.00	7.1%	40,000	
100,000	and over  	6,276.00	8.2%	100,000		64,000	100,000	3,200.00	7.9%	64,000	
						100,000	and over  	6,044.00	8.2%	100,000	
											
			2001 Proposed HH				
	Then tax		of Amount in 		If Taxable Income is	Then tax		of Amount in 	
Over	but not over	is	Plus	Excess of		over	but not over	is	Plus	Excess of	
											
0	7,000	0.00	1.7%	0		0	4,000	0.00	0.0%	0	
7,000	14,000	119.00	3.2%	7,000		4,000	9,000	0.00	2.0%	4,000	
14,000	20,000	343.00	4.7%	14,000		9,000	14,000	100.00	3.0%	9,000	
20,000	33,000	625.00	6.0%	20,000		14,000	20,000	250.00	4.5%	14,000	
33,000	53,000	1,405.00	7.1%	33,000		20,000	33,000	520.00	6.0%	20,000	
53,000	83,000	2,825.00	7.9%	53,000		33,000	53,000	1,235.00	7.1%	33,000	
83,000	and over  	5,195.00	8.2%	83,000		53,000	83,000	2,635.00	7.9%	53,000	
						83,000	and over  	5,005.00	8.2%	83,000	

3.	
CY 2001	Current	Proposed	Decline	%	Current	Proposed				
PIT Liability	Taxable	Taxable	Taxable	Decline	Liability	Liability	Decrease	Decrease	Decrease	
	Returns	Returns	Returns	Returns	(Million $)	(Million $)	(Million $)	%	Per Retn.	
Single	229,037	198,372	(30,665)	-13.4%	$230.2	$215.1	($15.1)	-6.6%	($66)	
Married Joint	257,575	240,406	(17,169)	-6.7%	$724.6	$680.4	($44.1)	-6.1%	($171)	
Married Separate	6,725	6,266	(459)	-6.8%	$10.3	$9.8	($0.5)	-5.3%	($82)	
Head of Household	71,079	53,616	(17,463)	-24.6%	$48.6	$42.4	($6.2)	-12.7%	($87)	
  Total	564,416	498,660	(65,756)	-11.7%	$1,013.7	$947.7	($66.0)	-6.5%	($117)	
										
	Current	Proposed	Decline	%	Current	Proposed				
	Number 	Taxable	Taxable	Decline	Liability	Liability	Decrease	Decrease	Decrease	
 Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions $)	%	Per Retn.	
     0 - 15,000	238,985	173,229	(65,756)	-27.5%	$38.2	$25.7	($12.5)	-32.7%	($52)	
15,000 - 25,000	95,577	95,577	0	0.0%	$72.0	$61.8	($10.2)	-14.1%	($107)	
25,000 - 40,000	93,358	93,358	0	0.0%	$143.4	$128.5	($14.9)	-10.4%	($160)	
40,000 - 75,000	90,840	90,840	0	0.0%	$280.8	$262.2	($18.5)	-6.6%	($204)	
Over 75,000	45,656	45,656	0	0.0%	$479.4	$469.5	($9.8)	-2.1%	($215)	
	564,416	498,660	(65,756)	-11.7%	$1,013.7	$947.7	($66.0)	-6.5%	($117)	

4.	
 Detail by filing status is as follows:
Detail										
	Current	Proposed	Decrease	%	Current	Proposed 	Decrease			
2001 Single	Single	Single	Number	Decline	Liability	Liability	$	Decrease	Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	133,890	103,225	(30,665)	-22.9%	$21.6	$16.5	(5.1)	-23.4%	($38)	
15,000 - 25,000	42,385	42,385	0	0.0%	$35.9	$32.2	(3.7)	-10.3%	($88)	
25,000 - 40,000	29,860	29,860	0	0.0%	$50.6	$47.1	(3.5)	-7.0%	($118)	
40,000 - 75,000	16,523	16,523	0	0.0%	$53.9	$51.8	(2.1)	-3.8%	($125)	
Over 75,000	6,379	6,379	0	0.0%	$68.2	$67.4	(0.8)	-1.2%	($125)	
	229,037	198,372	(30,665)	-13.4%	$230.2	$215.1	(15.2)	-6.6%	($66)	
										
		Proposed	Decrease	%	Current	Proposed 	Decrease			
2001 MFJ	MFJ	MFJ	Number	Decline	Liability	Liability	$	Decrease	Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	54,392	37,224	(17,168)	-31.6%	$9.5	$4.9	(4.6)	-48.3%	($84)	
15,000 - 25,000	39,999	39,999	0	0.0%	$26.1	$21.2	(5.0)	-19.0%	($124)	
25,000 - 40,000	54,915	54,915	0	0.0%	$79.3	$69.3	(10.0)	-12.6%	($182)	
40,000 - 75,000	70,387	70,387	0	0.0%	$214.7	$198.9	(15.8)	-7.4%	($224)	
Over 75,000	37,882	37,882	0	0.0%	$395.0	$386.3	(8.8)	-2.2%	($232)	
	257,575	240,407	(17,168)	-6.7%	$724.6	$680.4	(44.1)	-6.1%	($171)	
										
		Proposed	Decrease	%	Current	Proposed 	 Decrease			
2001 MFS	MFS	MFS	Number	Decline	Liability	Liability	$	 Decrease	 Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	3,366	2,907	(459)	-13.6%	$0.8	$0.6	(0.2)	-22.5%	($53)	
15,000 - 25,000	1,481	1,481	0	0.0%	$1.4	$1.3	(0.2)	-10.5%	($101)	
25,000 - 40,000	908	908	0	0.0%	$1.7	$1.6	(0.1)	-6.1%	($110)	
40,000 - 75,000	615	615	0	0.0%	$2.0	$2.0	(0.1)	-3.5%	($114)	
Over 75,000	355	355	0	0.0%	$4.4	$4.4	(0.0)	-0.9%	($113)	
	6,725	6,266	(459)	-6.8%	$10.3	$9.8	(0.5)	-5.3%	($81)	
										
		Proposed	Decrease	%	Current	Proposed 	 Decrease			
2001 H/H	H/H	H/H	Number	Decline	Liability	Liability	$	 Decrease	 Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	47,337	29,874	(17,463)	-36.9%	$6.4	$3.7	(2.7)	-42.5%	($57)	
15,000 - 25,000	11,712	11,712	0	0.0%	$8.5	$7.1	(1.3)	-15.8%	($114)	
25,000 - 40,000	7,676	7,676	0	0.0%	$11.9	$10.6	(1.3)	-10.8%	($167)	
40,000 - 75,000	3,315	3,315	0	0.0%	$10.2	$9.6	(0.6)	-6.1%	($187)	
Over 75,000	1,040	1,040	0	0.0%	$11.7	$11.5	(0.2)	-1.7%	($192)	
	71,080	53,617	(17,463)	-24.6%	$48.6	$42.4	(6.2)	-12.7%	($87)	

Major PIT Restructuring Bills
Bill Number and Sponsor	Description	FY 2002 Fiscal Impact	FY 2003 or Full Year Impact	
HB-97 (Lujan) & SB – 365 (Aragon)	Increasing low income comprehensive tax rebate; there are some losers; most of the increase will go to parents of minor children.	(28,000)	(29,500)	
HB-123 (Heaton)	Indexing w/ immediate expansion of brackets, same rates and  future indexing. 	(38,000)	(48,300)	
HB-235 (Burpo) & SB-124 (Wilson)	Governor's proposal w/ 7.7% top rate, restoration of top bracket levels, moderate zero bracket relief and moderate adjustment of intermediate rates.	(72,500)	(72,100)	
HB-424 (Varela)	non-recurring liability rebate w/ one-time rebate of 5% of liability for residents. 	(45,700)	3,400	
SB-43 (Carraro)	Modified governor’s bill w/ 7.9% top rate, restoration of  top bracket levels, slightly more zero bracket relief than governor's bill, moderate adjustment of intermediate rates.	(73,200)	(73,200)	
SB‑108 (Maes)	three-year phased-in deduction for net capital gains. 	(37,400)	(88,800)	
SB-124 (Wilson) & HB-235 (Burpo)	Governor's proposal w/ 7.7% top rate, restoration of top bracket levels, moderate zero bracket relief and moderate adjustment of intermediate rates.	(72,500)	(72,100)	
SB-213 (Cisneros)	$40M recurring PIT cut combined w/ LICTR increase w/ top rate 7.9%, partial restoration of top bracket level, moderate zero bracket, but no adjustment of lower rate upwards.	(42,800)	(42,500)	
SB-236 (Robinson)	Immediate 100% deduction for net capital gains.	(131,000)	(136,200)	
SB-343 (Altamirano)	Heating Bill Relief Rebate and recurring PIT reduction.	(38,500) NR	(1500) NR	
		(24,400) R	(22,100) R	
SB-365 (Aragon) & HB – 97 (Lujan)	Increasing Low Income Comprehensive Tax Rebate primarily for families with children.	(28,000)	(29,500)	
SB –568 (Smith & Altamirano)	Providing a personal income tax or corporate income tax credit for amounts of gross receipts tax paid on the provision of physician’s services.	(42,000)	(42,700)	
SB-766 (Aragoin)	Identical to Governor’s proposal for zero bracket and lowest five brackets. Adopts no additional benefits for top two brackets.	(64,300)	(65,300)	

For a more elaborate description and analysis, see our website at www.state.nm.us/tax/pubs/Billanalysis/Billanalysis.htm

Minor PIT Changes

Bill Number and Sponsor	Description	FY 2002 Fiscal Impact	FY 2003 or Full Year Impact	
HB-55 (Fuller)	$1,000 deduction from income for each school-age, home-schooled child	(1,200)	(1,300)	
HB-420 (Russell)	provides a $250 refundable personal income tax credit for each home-schooled child; 	(1,200)	(1,300)	
HB-421 (Russell)	provides a 100% private and religious school tuition tax credit, limited to $2,000 per eligible dependent.	(3,300)	(16,700)	
HB-422 (Russell)	provides a non-refundable credit for 100% of a donation to a private school which may use the money solely to provide scholarships for low income students; no provision against reclassifying donations from non-creditable to creditable.	(1,000)	(10,700)	
HB –566 (Burpo)	technical bill exempts the interest paid on county and municipal revenue bonds from state income taxation.	0	0	
HB – 646 (Atkins)	see SB-497.	(10,000)	(11,000)	
SB-325 (Wilson)	renewable energy tax credits against corporate income tax obligations.	(8,000)	(8,000)	
SB – 426 (Maes)	income tax credit for qualified small businesses of farms to reimburse lendees for new costs imposed on small business load guaranties.	(1,200)	(1,500)	
SB – 428 (Maes)	Imposing state taxes on rural electric cooperatives for unrelated business income. 	Indet.	Indet.	
SB-458 (Cravens)	income tax credit for ID card readers.			
SB – 497 (Boitano) & HB-646 (Atkins) 	income tax credit for premarital and marriage maintenance programs.	(10,000)	(11,000)	
SB – 541 (Nava) 	personal income tax exclusion for employees of manufacturing plants located within 15 miles of an international border.	(30)	(60)	
SB –579 (Komadina)	$3,500 income tax deduction per child attending home school	(830)	(860)