Business tax cuts ignored the big picture
To implement the cuts without addressing energy, workforce and infrastructure concerns do nothing to enhance economic growth
Let’s talk about a way to provide the ingredients for continued economic growth for New Hampshire. The current operating budget calls for a reduction in business taxes. However, the most significant problems for New Hampshire businesses are high energy costs and an insufficient supply of energy.
Without looking at the problems in their entirety, we do not solve the problems. Today’s industry demands reasonable cost and a predictable and sustainable supply of energy. We must face this issue head-on if we are to survive in the 21st century economy.
The most significant change in tax policy for the state of New Hampshire came when Walter Peterson was governor. The inventory tax was phased out and replaced by the Business Profits Tax. This major change in tax policy was brought about as a result of a commission put together by then-Gov. Peterson to look at tax reform. This tax was good for New Hampshire then and, with the Business Enterprise Tax formulated when Steven Merrill was governor, represents almost 30 percent of the tax revenue produced for the state.
One of the concerns with the operating budget passed last month by the Committee of Conference is the reduction of business taxes and how this will affect the economy. I was a member of the Business Tax Study Commission that made its report about a year ago. One conclusion of the commission was that the BPT rate is not a primary factor when a business is considering whether to expand or locate here; rather, energy costs, an educated workforce, infrastructure and real estate costs are more important considerations.
The action taken by the conference committee does not take into consideration the real stimulus that the economy needs. We are undergoing a period of gradual economic growth, and while growth is progressing, at this point in time, energy supply and affordability are the main ingredients required to stimulate the economy.
The growth of our economy is dependent on an ample supply of energy at a reasonable cost. If this is not addressed, regardless of what is done with taxes, the ability for strong economic growth is not possible. Energy costs drive the economy.
In addition, we must educate our labor force and produce educated men and women who will fill the jobs created by our economic growth. When this problem is solved, we can then look at taxes.
The Legislature is considering a plan where energy generating capacity will be sold off by one of our current generating utilities. This action must be considered part of an overall plan to bring a sufficient supply of power at a reasonable cost into our state. Relying on competitive energy markets to deliver the lowest possible price requires an ample and diverse energy supply so that there is true competition. Until we have sufficient and diverse supply, customers will continue to experience winter price spikes. Once we have achieved this diversity, we will witness strong economic growth with more businesses expanding in New Hampshire and new businesses considering locating in the Granite State.
I have received numerous complaints from businesses throughout the state who are very concerned about energy costs and a competent workforce. To reduce taxes without addressing these concerns will do nothing to enhance economic growth.
There are no simple solutions to this complex problem. Simply talking about reducing the tax rate without looking at the entire picture is inconsistent with good public policy. Solving the problem in its entirety is the right answer to providing for prolonged economic growth for our state and our country. Simple solutions done in haste never really work.
Lou D’Allesandro is a Democratic state senator from Manchester.