New Mexico Mountains by Atsme is licensed under CC BY-SA 3.0
If New Mexico lawmakers are looking for a way to slow investment, discourage expansion, and make the state less competitive, SB 151 is a good place to start. At a time when other states are working to attract investment and compete for jobs, this bill makes clear that New Mexico sees businesses less as drivers of economic growth and more as convenient sources of additional state revenue.
The bill makes significant changes to New Mexico’s corporate income tax structure by expanding the definition of taxable income and altering how certain deductions and federal provisions are treated under state law. While Democrats have framed the legislation as a necessary update to the state’s tax code, the bill effectively broadens the corporate tax base and raises taxes for businesses operating in the state.
Broadens the Corporate Tax Base by Rolling Back Investment Incentives
SB 151 decouples New Mexico from key federal cost-recovery provisions, including bonus depreciation and expensing for certain production property. In practical terms, this means businesses will have to wait longer to deduct the cost of equipment, facilities, and other capital investments.
Cost recovery matters: when businesses can deduct investment costs sooner, they face a lower after-tax cost of expanding operations, buying equipment, upgrading facilities, modernizing technology, and increasing productivity.
By rolling back these provisions, SB 151 increases the effective tax burden on investment-heavy industries, particularly manufacturers and other capital-intensive employers. If New Mexico wants more high-paying, capital-intensive jobs, it makes no sense to adopt a tax policy that makes it harder, and more expensive, for employers to build, expand, and modernize in the state.
Restricts Interest Deductions
Beyond investment write-offs, SB 151 also targets business financing by changing how New Mexico treats expanded federal business interest deductions. The bill would change state law to no longer follow the more generous federal rules that allow businesses to deduct a larger share of their interest expenses. That means companies will be able to deduct less interest on their state return than on their federal return, increasing their state taxable income and raising their tax bill.
Interest deductibility isn’t a “loophole,” it’s a core feature of how businesses finance inventory, equipment, facilities, and expansion, especially in capital-heavy industries. Restricting these deductions at the state level raises the cost of financing growth and can slow business expansions, with the real-world effects felt by workers and local businesses.
Expanding the Corporate Tax Base to Reach Global Income
Outside of deductions, SB 151 also broadens the general definition of what New Mexico counts as taxable corporate income. The bill would reverse the current treatment of certain foreign earnings and pull more global income into the state corporate tax base. This is of particular concern for large multinational companies operating in the state with significant earnings outside of it.
This is not a minor accounting tweak. It raises serious double taxation concerns and injects additional complexity into an already complicated tax system. Businesses that operate across borders already navigate federal and international tax rules. Layering additional state-level taxation on top of that increases compliance costs, creates uncertainty, and sends a clear message: New Mexico is willing to tax more simply because it can.
A Steep Tax Increase Disguised as Conformity
Supporters will argue that this legislation merely “decouples” from certain federal provisions. But decoupling in this context means something concrete: removing favorable federal treatment and replacing it with a more restrictive state tax base.
When the state eliminates bonus depreciation, limits certain interest deductions, and expands the corporate tax base to cover global income, it is not making a neutral technical adjustment. It is broadening the corporate tax base and increasing the overall corporate income tax burden on businesses operating in New Mexico.
And every tax increase carries an implicit claim, that the state is already spending every existing dollar efficiently, and that the only solution is to collect more. That is a ridiculous argument to make in a state that is projected to run a $485 million budget surplus, with roughly $3 billion in general fund reserves.
Undermines New Mexico’s Competitiveness
Every day, New Mexico is competing with other states for investment, jobs, and capital. Across the country, lawmakers are lowering tax rates and simplifying their tax codes to attract both businesses and taxpayers. The goal is clear: create a stable, predictable, pro-growth tax climate that encourages business expansion and job growth.
SB 151 moves in the opposite direction. By broadening the corporate tax base, weakening investment incentives, increasing complexity, and expanding exposure to foreign-income taxation, the bill makes capital investment more expensive, and the tax code less neutral.
This is particularly concerning because the economic literature is clear: among the major ways governments raise revenue, corporate income taxes are widely regarded as the most economically harmful. Numerous studies have found that corporate taxes distort investment decisions, reduce capital formation, slow productivity growth, and ultimately suppress wages. Capital is highly mobile, and when the after-tax return on investment falls, investment flows elsewhere. Workers bear much of the long-term cost through lower wage growth and fewer job opportunities.
If lawmakers are serious about long-term economic growth, job creation, and attracting new industry, they should be focused on lowering tax rates, maintaining pro-growth cost recovery rules, and avoiding punitive and unnecessary expansions of the corporate tax base.
For taxpayers, workers, and New Mexico’s economic future, SB 151 should be rejected.
