Lower business taxes = lower electricity costs
Sophisticated employers look at all cost factors when determining where to grow or locate
Senate Bill 1, a bill before the Legislature, would modestly reduce New Hampshire’s excessively high business profits tax. A related bill, SB 2, would lower another burdensome business tax, the business enterprise tax. How would these two measures help reduce the electrical energy cost burden?
New Hampshire’s BPT, essentially our corporate income tax at 8.5 percent, is among the highest in the country (only nine other states and the District of Columbia have higher rates). Our BET, now at 0.75 percent is a unique method (some call it a back-door way) of collecting taxes on wages. Together, they are the largest source of tax revenue to the state’s general fund and put us near the bottom – 48th out of 50 states – for offering a business-friendly tax climate, according to the Washington, D.C.-based Tax Foundation’s 2015 Facts and Figures.
They create an oppressive tax environment for existing businesses, startups and those businesses looking at our state for expansion or relocation.
The cost of electrical energy in New Hampshire is equally alarming, particularly so if you’re a large energy user in the manufacturing sector, which by almost any measure contributes more to the New Hampshire economy than any other sector.
This past winter, electricity users in New Hampshire and the rest of New England paid $2 billion more for energy than they did just a few years ago. The winter before, they paid nearly $5 billion more.
The cause of our energy crisis? New England lacks enough natural gas pipeline and electrical transmission capacity to balance electricity supply with demand. This will continue to be a grave challenge for businesses in New Hampshire and the region until key energy infrastructure expansion projects are approved and constructed, which will take years.
How are electrical energy and lower business taxes related? Most sophisticated employers, particularly manufacturers, look at all cost factors when determining where to grow or locate. These factors include access to STEM-educated workers, health care costs, a state’s environmental and labor regulatory atmosphere and infrastructure capacity, such as roads, bridges, water and waste disposal. Importantly, they also look closely at business taxes and energy costs.
Lowering the BPT and BET, as proposed in SB 1 and SB 2, will provide important relief to employers looking at growth options outside New Hampshire due to high energy costs. That’s an important link – well worth the modest projected reductions to the state’s general fund. In fact, without lowering these burdensome business taxes, the state and local units of governments may well see substantially more pronounced reductions in their respective tax bases as businesses choose to relocate outside of New Hampshire and New England to other parts of the country or world with markedly lower electrical energy costs.
Simply put, lowering the BPT and BET will help prevent that outcome.
Jim Roche is president of the Business and Industry Association of New Hampshire.