By State Senator Jerry Ortiz y Pino

One of Governor Martinez' pointed criticisms of the recent legislative session was that it failed to enact GÇ£tax reform.GÇ¥ She dangles the need for such action as something that a special session will have to address if she is to sign any balanced budget proposal.

There are several fallacies in the Governor's position. First, legislators actually did pass a tax reform measure, HB191, initially introduced by Republican Representative Larry Larranaga and amended in Senate Finance to include several pieces taken from the broader bill, HB412, sponsored by another Republican, Representative Jason Harper. While it was not as comprehensive a measure as Harper's original proposal (and which the Governor apparently supports, though which of several versions she favors is unclear'it has changed repeatedly and continues to evolve even now) it did contain elements for which the consequences could actually be calculated.

There was a very good reason for resisting HB412 in the Senate. While the principle (broaden the Gross Receipts Tax base and lower the rate) makes sense, the complexity of Representative Harper's bill which attempts to end almost all exemptions to the GRT, made it a 333 page goliath of dense, arcane tax verbiage. When it reached the Senate in the last week of the session it proved literally impossible for our staff experts to score. We couldn't tell if it would increase revenues or decrease them'or by how much.

So instead of ramming it through, our Finance Committee chose the far more reasonable alternative of pulling out a few pieces that could be scored and including them in Larranaga's less-ambitious tax reform measure. The Governor, predictably, vetoed that one, too. But the Legislature has been twice-burned in recent years by supposed GÇ£tax reformsGÇ¥ billed as GÇ£revenue neutralGÇ¥ or to even as a stimulus producing additional tax revenue.

When Bill Richardson eliminated in stages all state personal income tax brackets above $26,000, legislators were assured this would spark an enormous boom in wealthy people choosing to move here and in wealthy New Mexicans investing in businesses here. Neither happened and we effectively wiped out $100 million a year in revenues that had been used to help finance state programs.

Then, when Governor Martinez sprang a last-minute corporate income tax GÇ£reformGÇ¥ on us four years ago, we were again confidently assured by her tax gurus that this would be an economic engine resulting in greater business activity, hence greater state revenue. Once more it was a mirage'and the true cost of that GÇ£reformGÇ¥ is at least another $100 million annually-- lost revenue with nothing to show for it.

So talk of GÇ£tax reformGÇ¥ makes me very nervous. I agree our tax system has become seriously deformed, but insufficient attention is given to what the previous tax cuts have produced: an imbalanced, twisted tax system, one overly dependent on the gross receipts tax (which has grown following each of the other GÇ£reformGÇ¥ attempts). There is a fairer and far more predictable tax source that we need to return to: the income tax: the way to end our regressive revenue picture; the way to stop squeezing a higher percentage of their money from the poor and working class than the wealthy pay.

No true tax reform can be discussed that does not also include an effort at re-introducing upper tax brackets to New Mexico's structure. These could be fairly broad. Since all taxpayers pay the same rate now for everything over $26,000 in income, adding three additional 1% brackets (at say, $126,000, $226,000 and $326,000) ought to be considered.

In fact, we could consider tying additional income tax brackets to Harper's GRT reform. They could be used as triggers: should GRT revenue under Harper's bill drop, we could add income tax brackets and use the resulting revenue to make up the difference.

Another approach to consider instead of gambling on Harper's GRT reform taking effect immediately might be to have it begin in three years. Then we could conduct computer simulation studies to get information about what would have happened to revenues if we had actually changed the taxes the way Harper's bill would have done.

Tax reform is legislative sausage-making at its most extreme. We shouldn't rush into any more mistakes, no matter how irritated careful deliberation makes the Governor feel.