Key House Democrat wants to end BPT rate reductions
But BET rate would still be headed down under her proposal
The rate of New Hampshire’s business profits tax will go back up if Rep. Susan Almy, the former and future chair of the state House Ways and Means Committee has her way.
But Almy, a Lebanon Democrat, would allow the business enterprise tax rate to continue to go down.
Almy plans to introduce two bills, one that would repeal the BPT reductions that began in 2016. That would increase the rate to 8.5 percent. The rate for this year is 7.9 percent. It is scheduled to go down next year to 7.7 percent and eventually to 7.5 percent for the tax year ending in 2021.
Almy’s second bill would empower the Legislative Fiscal Committee to either repeal or adjust the BPT rate if the state’s rainy day fund is in jeopardy due to decreases in revenue. The exact language has to be worked out, but Almy would want the stopgap to kick in if revenue falls short of expectations, forcing the fiscal committee to tap the fund to provide basic services.
Currently, however, revenue from business taxes have been increasing, despite the decrease in rates, or – as some tax cut proponents would argue – because of them. So far this fiscal year, for instance, business taxes have raised $233.4 million in revenue, more than any other source of revenue, and 23.2 percent more than the same months in the previous year. BPT revenues, which account for $137.4 million, went up 17.5 percent while BET revenues increased 32.2 percent.
Conservatives have argued that state tax cuts stimulated the economy, resulting in more revenue. But Almy argued that the economy was more stimulated by federal tax cuts and a general upturn following the recession, both of which might be coming to an end.
“The effect of stimulus on the growth curve is going to be gone,” she said. “Nobody knows what that will bring. I was chair of Ways and Means during the last recession, and I don’t want to go though that again. The corporate income tax, and that is what the BPT is, is our only mechanism. It’s a volatile one, but it is all we’ve got.”
She said that raising the BET rate, since it is mainly based on the size of a company’s payroll, not its profits, “might discourage keeping people on the payroll,” she said.
The BET was at 0.75 percent rate before 2016. It’s now at 0.675 percent, scheduled to go down to 0.6 percent next year and to 0.50 percent by 2021. Neither of Almy’s bills would change that, she said.
Almy said she expects Republicans would attack the proposal, and although that party would constitute a minority next session in both changers, they would have enough votes to sustain any veto by Republican Gov. Chris Sununu, who has long supported the tax cuts.
Still, Almy argued, “we are spending under the efficiency level for the services that will keep our economy going. We need to get back to it.”
Businesses depend on many of these services, she emphasized.
“We need to combat the substances abuse epidemic which affects business. We need to do more training to help alleviate the workforce shortage. We need more training in the trades to help us to build affordable housing,” she said.
Forcing responsibility for these services down to the town level, she added, is “inefficient. It wastes a lot of money when it’s done by the property tax, which accounts for two-thirds of our system. It distorts our economy and our society.”
But the Business and Industry Association of New Hampshire, would strongly oppose increasing business taxes, “especially when we seem to be in uncertain economic times,” said David Juvet, the organization’s senior vice president of public policy.
He said the state’s business tax rates “are among the highest in the country” and raising them would be a message to businesses “that you can’t trust the Legislature when they say they will modestly decreases taxes to not just freeze that decrease but reverse course. That is a terrible message.”
As for the measure giving the Legislative Fiscal Committee the adjust rates, Juvet said that it would really be empowering it “to arbitrarily raise taxes.”
“I don’t even know if that is constitutional,” he said.
It is unclear how much support Almy will have for her proposals, even within her own party.
In an interview with NH Business Review, newly elected House Speaker Steve Shurtleff, D-Penacook, said, “I don’t see why we wouldn’t maintain the status quo” when it comes to tax cut. He later clarified that “status quo” meant allowing the rates to continue to go down.
“We've got a good robust economy in New Hampshire,” he told NH Business Review at the time. “We don't want to do anything to jeopardize that.”
But on Thursday, he said in a voicemail that Almy will chair the Ways and Means Committee next year, and that he must have misspoken during the interview because he does support a reversal of the tax cuts and while he had to see the bill, he said that Almy was “on the right track.”
Sen. Dan Feltes, D-Concord, who will chair the Senate Ways and Means Committee, declined comment until he had a chance to see the language in the bills.