CONCORD, N.H. — Senators are split along party lines over whether lowering New Hampshire’s business taxes would help or hurt the state’s budget and economy.
The Senate Ways and Means Committee heard testimony Tuesday on two Republican-sponsored bills that would lower the business enterprise and profits taxes and could mean a combined $42 million less in annual revenue by 2019. Republicans argue New Hampshire’s corporate tax rates, some of the highest in New England, make it hard for the state to keep existing businesses and attract new ones. Democrats say New Hampshire’s overall tax structure is relatively good for businesses and that cuts would blow a hole in the state budget.
The two taxes are some of the state’s highest revenue generators, expected to generate $568 million – or 26 percent of the state’s unrestricted revenue in the 2015 budget.
Thirteen Republican senators have co-sponsored a bill to reduce the profits tax, along with House Majority Leader Jack Flanagan, House Deputy Speaker Gene Chandler and the chairmen of the House Ways and Means and Finance committees. Gov. Maggie Hassan’s spokesman, William Hinkle, did not say whether the Democrat would veto the bills if they pass.
“Governor Hassan believes that these two bills would create a significant hole in future budgets with a resulting significant cost to our people, businesses and economy,” Hinkle said.
One bill proposes reducing the business profits tax from 8.5 to 8 percent by 2018. The tax is assessed on any business with gross receipts over $50,000. Businesses can count a number of credits toward that tax, and only 1 percent of filers actually pay it, said Kate Skouteris, assistant commissioner in the Department of Revenue Administration.
“Increasingly, business taxes are leaving New Hampshire uncompetitive,” said Senate Majority Leader Jeb Bradley of Wolfeboro, the bill’s prime sponsor.
The second bill, sponsored by Sen. Andy Sanborn of Bedford, would lower the business enterprise tax from .75 percent to .675 percent by 2018. That tax is assessed on a business’s wages, dividends and interest.
Bradley’s bill would mean $10 million less in revenue in fiscal years 2016 and 2017 and $20 million less in fiscal years 2018 and 2019. Sanborn’s bill would mean $7.6 million less in fiscal year 2017, $15 million less in 2018 and $22 million less in fiscal year 2019. The senators say the decreases would be offset by the state’s natural revenue growth and because lower rates would bring more businesses to the state.
The current two-year budget is $10.7 billion; Hassan will propose a new budget next month.
Jeff McLynch, executive director of the liberal-leaning New Hampshire Fiscal Policy Institute, said the state is already facing tight revenues for the upcoming budget that will make it hard to fund important public services.
“(These bills) would make it nearly impossible for New Hampshire to meet those challenges, forcing deep and permanent spending cuts and severely impairing the state’s ability to invest in education and other areas,” McLynch said.
