Tax cuts, energy policy changes at stake in NH budget votes
Senate, House to weigh in on budget compromise, accompanying policy changes
It isn’t just keno and kindergarten at stake Thursday as the NH Senate and House vote on budget compromises emerging from the committee of conference. There are numerous provisions, some not well known, that could affect businesses.
Most of the provisions are spelled out in the 117-page trailer bill accompanying the budget:
• A second round of business tax cuts. Under the first round, the business profits tax rate of 8.5 percent is scheduled to go down to 7.9 percent by 2019 and the business enterprise tax will drop from 0.75 to 0.675 percent. Under the new proposal, the BPT rate would be cut to 7.7 percent by 2019 and 7.5 percent by 2021. The BET would decrease to 0.6 percent in 2019 and down to 0.5 percent in 2021. The state Department of Revenue Administration estimates the cuts would result in a revenue loss of $106 million, but supporters say that business tax revenues rose after the most recent cuts.
• An increase in the Section 179 capital expense deduction: The maximum up-front deduction for major expenses allowed on a company’s BPT return would rise from $100,000 to $500,000. The fiscal note on a similar bill passed and tabled back in March said that the state would have lost just under $10 million if it had expanded the deduction back in 2014. But supporters of the bill suggest that the effect on state revenues would be negligible, since what’s deducted on the front end would be lost on depreciation on the back end. In addition, they say that equipment purchases would create more economic activity, which would theoretically result in more business profits to tax.
• An end to the electricity consumption tax: This costs businesses and residents $6 million a year. It is widely seen as a way to offset a rate increase expected if Gov. Chris Sununu signs Senate Bill 129, passed by the Legislature last month, which would increase payments to biomass generators and up the percentage of solar energy utilities would be required to purchase under Renewable Portfolio Standards. The Business and Industry Association strongly opposes SB 129, while wood and solar industry groups strongly support it. Neither side seems to have a problem with the consumption tax cut.
• End the raid of the Renewable Energy Fund for Department of Homeland Security spending. Last time, the Legislature diverted over $500,000 that was aimed to be used for clean tech projects.
• Creation of the Department of Business and Economic Affairs by removing the Division of Parks and Recreation from the Department of Resources and Economic Development and transferring it to a new Department of Natural and Cultural Resources.
• A freeze of tourism funding to current levels. It was formerly based on a percentage of the rooms and meals tax, which given economic expansion, would probably have gone up. It does set aside $1 million for highway welcome centers.
• An end to Medicaid expansion if work requirements are not approved by the federal government with a special waiver. The original Medicaid expansion also contained work requirements, but the federal government rejected them. The expansion happened anyway, since the original bill was not contingent on them. This time, such a rejection would end the program, but the administration in Washington has changed. The BIA has strongly been supportive of Medicaid expansion.
• Sale of lottery tickets online and by phone. This could raise $13 million for the biennium, but the NH Grocers Association doesn’t like it because it means people won’t have to go into stores each time they want a lottery tickets.
• Establishment of keno to fund kindergarten. Keno would be allowed at establishments with a liquor license. Grocery stores won’t be included, as they have been in other states.