The legislation is set to amend Section 7-2-2 NMSA 1978, which defines various terms related to income tax. By increasing the standard deduction, it aligns state tax regulations more closely with federal standards, potentially simplifying the tax filing process for residents. This change is anticipated to impact lower and middle-income households particularly, as they stand to gain the most from increased deductions, which can lead to increased disposable income.
Summary
Senate Bill 105, introduced by Bill Tallman, aims to increase the standard deduction for income tax in New Mexico to one hundred ten percent of the deduction allowed by the federal government. This adjustment is designed to provide greater financial relief for taxpayers, allowing them to reduce their taxable income and subsequently their tax burden. The bill applies to all taxpayers, focusing on individual and family income taxation and outlining changes to existing tax legislation.
Contention
Notably, while the bill may receive support for aiding taxpayers, there may be contention surrounding the financial implications for state revenues. Critics may argue that increasing deductions could reduce state income tax collections, complicating funding for public services. Opponents may express concerns that the benefits favor wealthier taxpayers more than lower-income individuals, leading to a skewing of the intended equitable impact. Therefore, discussions around this bill are likely to center on balancing taxpayer relief against the broader financial health of state revenue.
Provides for a flat rate for purposes of calculating income tax for individuals, estates, and trusts, increases the standard deduction, and modifies or repeals certain income tax deductions and credits (Item #5 and 6) (RE1 DECREASE GF RV See Note)