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Education surtax bill 346 cleared the House and is headed to the Senate with a week left in the legislative session.
The bill proposes to raise taxes by nearly $400 million a year to finance public school improvements. It will increase the gross receipts tax by three-quarters of a cent.
For a $100 purchase, the tax would go up 75 cents if the bill is enacted.
Rep. Jeannette Wallace, R-Los Alamos, Santa Fe and Sandoval counties addressed the proposed measure this morning.
“This bill is what the funding formula needs in order to move forward, however, Los Alamos National Laboratory has to face that increased GRT without receiving any new money from the government to do so,” Wallace said. “And we know what happened to northern New Mexico the last time when the lab had to first start paying GRT, it had to cut jobs. This bill hurts WIPP in Carlsbad and it hurts LANL and it really hurts the whole valley because they are the ones who lose the jobs.”
Los Alamos Superintendent Mary McLeod agreed. “It’s not only going to have an affect on LANL, we (schools) pay a gross receipts tax when hiring contractors,” McLeod said. “It’s intended to bring money into the schools and this will probably do that but it’s going to cost us more when we contract for maintenance and renovation work on our buildings.”
This bill impacts anyone who has to pay GRT, she said, adding that there was an outcry from the business community when the bill was first proposed.
“It’s probably not a good time to start increasing taxes,” McLeod said. “They (legislators) are trying to find ways to bring money into our schools and ensure a better education for all students and we appreciate that but I hope they (senate) study this very carefully because the tax isn’t just on goods, it’s on services, too,” she said.
Supporters say additional taxpayer money is needed to implement a proposed overhaul of New Mexico’s school funding formula to ensure students are receiving an adequate education.
“Many people want more money for education but don’t understand it’s related to taxes or some kind of revenue,” Rep. Mimi Stewart, D-Albuquerque, who sponsored the measure, said Friday.
She urged her colleagues “to take courage and know that voting for this bill means that you’re helping the kids in your district and the state.”
Opponents objected to increasing taxes during a recession and said the gross receipts tax was regressive.
Advocates of the bill pointed out that New Mexico had removed the gross receipts tax from food several years ago, lessening the burden of the tax on lower-income residents. Stewart maintains that increased spending on schools was “the best investment we could make” and would help the economy because more school workers and teachers will be hired.
“This bill is essentially an economic development and jobs creation bill dedicated to the public schools,” Stewart said.
The state levies a 5 percent gross receipts tax on goods and services. The overall rate varies because cities and counties impose local levies on top of the state rate. Statewide, the tax averages 7.16 percent.
The proposed 0.75 percent increase would generate $389 million in the 2010 fiscal year, which starts in July; $402 million in 2011; and $420 million in 2012, according to the Taxation and Revenue Department.
Currently, public schools receive more than $2 billion a year in state aid and account for slightly more than two-fifths of yearly spending from the state’s main budget account.
A nearly two-year study concluded schools need a 15 percent increase in state aid to provide a comprehensive education for students.
The proposed tax increase and funding formula changes will ensure New Mexico meets its constitutional obligation to adequately finance schools, Stewart said.
Opponents contended there was no guarantee that the additional money will produce improvements in student performance.
“For me to go home ... and say, ‘Oh by the way, I just voted for the largest tax increase in recent memory in New Mexico with no guarantee that it’s going to improve achievement’ ... I can’t do that in good conscience,” said House Republican Whip Keith Gardner of Roswell.
Rep. Miguel Garcia, D-Albuquerque, said the money raised by the proposed tax increase was less than personal income tax cuts that have been implemented since 2003, and he said New Mexicans with higher incomes received the greatest benefit from those income tax rate reductions.
Supporters emphasized that additional money from the tax increase will help finance extra programs and services for students.
“Myself, all parents around the state want better for their kids and they want good schools for their children, and this is going to help us get there and stay there,” Rep. Brian Egolf, D-Santa Fe said.
The bill passed the House 37-31 and goes to the Senate, where supporters acknowledge the proposal faces strong opposition.
The Associated Press contributed to this story.