NH House panel votes to jettison latest business tax cuts
Ways and Means also OKs measure to tax capital gains
The NH House Ways and Means Committee voted to freeze planned cuts in the rate of the state’s two major business taxes to last year’s level, putting it in agreement with two bills that the Senate is scheduled to hear Wednesday morning.
It also voted to start taxing capital gains and use the money raised to lower the statewide property tax.
The tax cuts, which under current law were going to continue to fall until 2021, would result “in us being in real trouble in terms of maintaining our budget,” argued Rep. Susan Almy, D-Lebanon, chair of the committee and prime sponsor of the bill. “This will stop the process in its tracks. It does not go backwards.”
She added, in fact, that she “would have preferred that, quite frankly, but we are amending it to rates that were in place in December – the last time that any business has made a payment on this tax.”
Originally, Almy’s bill, House Bill 623, would have increased the business profits tax rate to 8.5 percent, the rate it was before 2016 when a series of rate cuts were first enacted by the Legislature.
The committee also voted to retain HB 482, which would have allowed the Joint Legislative Fiscal Committee to increase the rate to 8.5 percent should the state’s rainy day fund be in jeopardy due to a recession.
Instead, Almy proposed, and the committee voted, to amend HB 623 to make the current rate of 7.7 percent – which went into effect at the start of January – to last year’s rate of 7.9 percent. The amendment also returned the business enterprise tax rate to last year’s rate of 0.675 percent. Almy’s original bill would have accelerated the planned tax cuts in the BET, dropping it down this year to 0.5 percent instead of in 2021.
The BPT is scheduled to fall to 7.5 percent in 2021, but the bill also repeals those future cuts.
Both the amendment and the bill passed on a 13-7 party line vote over the objections of Republicans who pointed out that business tax revenue has gone up since the rates went down.
“They said we were going to blow a hole in the budget, and we had record revenue,” said Rep. Patrick Abrami, R- Stratham. “Instead, we had record revenue.”
“Not due to the tax,” shot back Almy, who argued that it was because of the economic recovery and stimulus from the federal tax cut.
Abrami also argued businesses may not have paid the lower 7.7 percent rate yet, but they had planned on it. “This will make it harder to bring businesses to New Hampshire,” he said. “Plus it’s not right to change in midstream.
“It is also not right when the voters speak and you don’t do anything,” Almy responded.
“We are trying to strike a balance,” said Rep Edith Tucker, D-Randolph. “We are in uncertain times. New Hampshire has been in a good position, and we want it to remain in a good position. There are a lot of complaints about high property taxes.
“Property taxes are a function of local government,” said Rep Jordan Ulery, R-Hudson.
“Property taxes go up because we downshift,” said Almy.
“Property taxes go up because they are paying teachers more in the next town,” he retorted.
The next bill had a less debatable connection to property taxes.
HB 686 would expand the interest and dividends tax to cover capital gains, though it would increase the exemption from the tax from $2,400 to $5,000. Even so, the revenue raised would be directed to a cut in the statewide property tax.
It also increases the adequate education grant from $3,561 to $4,000 per pupil, though that part could be fiddled with by the House Finance Committee should it be passed by the full House next week. The House is expected to vote on the business tax cuts at that time as well.
The Business and Industry Association of New Hampshire plans to hold a press conference on Wednesday to discuss the tax measure as well as other legislation that it considers anti-business to coincide with Senate hearings on two other bills – Senate Bills 135 and 301 – both of which would also change business tax rates. (The hearings might stretch into the afternoon because of a snow delay of at least two hours.)
For now, BIA Senior Vice President of Public Policy Dave Juvet only had this to say about the Tuesday’s vote: “We supported the (business tax) reductions that were promised in the current operating budget.”