N.H. Senate gets ready to vote on tweaked business tax cuts
But despite passage, four tax credit bills are in limbo pending budget talks
The New Hampshire Senate is poised to cut business tax rates, though the cuts now proposed would be stretched out over six years to slightly ease the fiscal impact on the next few state budgets.
Last week, the Senate Ways and Means Committee, on a party-line vote, passed the amended Senate Bills 1 and 2. The bills would incrementally reduce the business profits tax and business enterprise tax to 7.9 percent and 0.675 percent, respectively, part of a “coordinating strategy to help reduce the cost of doing business in New Hampshire,” said bill sponsor Sen. Jeb Bradley, R-Wolfeboro, the Senate majority leader.
The cuts are essentially the same as in Bradley’s original bills, though the BPT would drop one-tenth of a percent lower than the 8 percent he had previously proposed.
“This would put us ahead of Massachusetts,” he said.
The big change is the timing. The cuts would start a year early, on returns ending on or after Dec. 31, 2015. The BPT, now at 8.5 percent of all profits, would drop to 8.3 percent this year, 8.1 percent in 2017 and 7.9 percent in 2019.
The BET, now at 0.75 percent of wages, dividends and interest, would go to 0.725 percent in 2015, 0.7 percent in 2017 and 0.675 in 2019.
That means that the estimated effect on this biennial budget would be reduced, according to the Department of Revenue Administration. Because of the uncertainty of quarterly filing, the DRA didn’t estimate the impact on 2016, but the anticipated revenue lost from each tax cut added up to $17.6 million in fiscal 2017. Under the amended bill, the loss adds up $15.6 million.
In fiscal 2018, the revenue loss would drop from $35.2 million to $32.1 million, and in fiscal 2019, the revenue loss from $43 million to $33.1 million. Revenue losses in fiscal 2020 would exceed $50 million.
Supporters of the cuts contend that the profits and jobs generated by the tax cuts would create enough revenue to substantially offset, or even exceed, the revenue lost.
Democrats on the committee, who voted against cutting tax rates across the board, argued the cuts would prevent the state from investing in everything from roads and bridges to education.
Tax credits in limbo
The Democrats have supported more targeted cuts, such as the expansion of the research and development tax credit.
The Senate unanimously passed SB 6 (also sponsored by Bradley), which would expand the total cap on that credit from $2 million to $7 million. But the bill was tabled right after passage, awaiting budget deliberations.
According to Bradley, a similar fate awaits:
• SB 215, proposed by Sen. Lou D’Allesandro, D-Manchester, which would allow businesses to take their R&D tax break up front, in a cash rebate, if they were willing to give up 35 percent.
• SB 201, introduced by Sen. Molly Kelly, D-Keene, which would increase the cap from $5 million to $8 million on the tax credit program overseen by the Community Development Finance Authority that gives a 75 percent state business tax credit against a corporate donation made to any approved project.
• SB 217, proposed by Sen. Nancy Stiles, R-Hampton, which would allow businesses to defer BET taxes on the wages from any new jobs created.
The Senate Ways and Means committee also approved those three bills last week. Bradley said he didn’t know if the BPT and BET tax cuts would be tabled as well, or sent to the House.