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NM lawmakers green light $200 million in tax hikes

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By Barry Massey

SANTA FE, N.M. (AP) — The Legislature approved a $5.6 billion budget on Wednesday and the largest tax increase package in more than two decades to help pay for public schools and government services next year.

Passage of the measures moved lawmakers close to the finish line of a politically charged special session. Clashes over tax increases and government spending previewed likely campaign themes in this year's elections.

Half of the Legislature — all House seats — and the governorship are up for election. Democratic Gov. Bill Richardson is term limited and can't seek re-election.

Lawmakers sent the governor a measure that will generate more than $200 million by raising several taxes. Included is a one-eighth cent increase in the state's 5 percent gross receipts tax on goods and services. New Mexicans also will resume paying a tax on food, which will average about 2 percent statewide.

Pending in the Senate was a proposed 75-cents-a-pack increase in the cigarette tax to raise $33 million, and measures to finance capital improvement projects.

The special session will continue at least another day. The House and Senate decided to come back Thursday for what could be a final mop-up.

The budget will trim spending by $100 million, or 1.2 percent, from what was allocated for education and state agencies in the current fiscal year, which runs through June. The budget goes to the governor. It passed the Senate on a party-line 26-14 vote, with Republicans in opposition.

"We tried to strike a balance. We're trying to preserve education positions. We're trying to preserve government positions and we're trying to preserve public sector positions," said Sen. John Arthur Smith, D-Deming, chairman of the Senate committee that handles the budget and tax issues.

The tax bill cleared its final legislative hurdle when it passed the Democratic-controlled House 38-28. Six Democrats voted against the measure and one Republican supported it. The tax bill goes to the governor, who will have 20 days to decide whether to sign or veto it. The Senate had approved the proposal a day earlier.

Richardson's office declined to comment on the legislative budget and tax package.

Republicans opposed the tax increases, saying the Legislature should have cut spending more to balance the budget.

"We're talking about hundreds of dollars to individual taxpayers who, by the way, I think are hurting more than state government right now," said House Republican Whip Keith Gardner of Roswell.

"People are being laid off. People are losing their jobs," said Gardner. "But yet we're ready ... to say, 'Hey, go ahead, impose a little bit more, we just want to keep government whole. We want to keep the beast alive and keep it moving forward."

House Speaker Ben Lujan, a Santa Fe Democrat, said tax increases were necessary to prevent damaging cuts in government services and "if we're going to have a functional educational system, a health system that addresses the needs of all of our citizens."

The Senate waited to consider the budget until it was clear the House — with its splintered Democratic majority — could muster enough votes for the $200 million in tax increases. The food tax is unpopular with many Democrats because they contend it will fall heaviest on low-income New Mexicans.

Rep. Al Park, an Albuquerque Democrat, said he disliked the food tax but supported the tax measure as a compromise to resolve budget problems.

"Some of the things I like. Some of the things I hate. But the point is we need to try to spread the pain among all segments of our society, to make sure that we are all participating in solving this challenge," said Park.

Richardson called the Legislature back to work on Monday because lawmakers failed to agree on a budget during a 30-day session ending last month. The state faces a budget squeeze because the economic downturn has weakened revenues.

According to the Legislative Council Service, one of the largest tax packages in New Mexico history came in 1986 when income, gross receipts and other taxes were raised by $150 million — representing nearly 11 percent of the state budget then.

The proposed tax increases of more than $230 million are equal to more than 4 percent of next year's proposed state budget. Lawmakers approved a nearly $16 million tax increase during the 30-day session and that money also will help balance the budget.