NH House votes to roll back business tax cuts, establish capital gains levy
Parties spar over ‘fairness’ of proposed changes
The New Hampshire House on Wednesday voted to roll back business tax cuts and freeze them at last year’s levels and start taxing capital gains in order to provide property tax relief.
The back-to-back votes were both passed by comfortable margins but not enough to overcome a gubernatorial veto.
The House first passed House Bill 623, which would roll a cut in the rates of the business profits tax and the business enterprise tax that went into effect at the beginning of the year and freeze future scheduled cuts.
That will mean that the rate of the BPT, now at 7.7 percent, would go back to 7.9 percent, but not back to the 8.5 percent rate it stood at before hen the current wave of tax cuts started in 2016. The business enterprise tax rate would also be frozen at 2018 levels.
Revenues from the business taxes have increased despite the tax cuts, or some say because of them. But Rep. Susan Almy, D-Lebanon says that the revenue rise has been because of the economic recovery and federal tax cuts. But those days, she said, are over, as the nation and the state seems to be heading into another recession.
Others argued that cutting business taxes has caused the state to continue to downshift costs to municipalities, increasing property taxes. And businesses actually pay 2.5 times in property taxes than they do in business taxes, according to Rep. Jerry Stringham, D-North Woodstock.
But the tax cuts have stimulated growth, said Rep. Patrick Abrami, R-Stratham, and, besides, the House promised the scheduled cuts. Retroactively increasing them “is a betrayal of the business community,” Abrami said.
The House voted to pass the bill 200 to 141.
Capital gains tax
The connection between business and property taxes is less tenuous in HB 686, which would extend the 5 percent interest and dividends tax to cover capital gains, and with the money raised cut the statewide property tax by 25 percent.
It would also increase the statewide education adequacy grant from $3,561 to $4,000 per pupil, which municipalities could use to lower the local part of the property tax. It also would increase exemptions on both the I&D tax, more than doubling it to $5,000 for an individual under 65, and nearly tripling it for a couple over 65 to $25,000. Some 4,600 investors will actually see their taxes cut because of the exemptions, said the bill’s sponsor, Dick Ames, D-Jaffrey, and the tax on capital gains would still be the lowest in the Northeast.
“Currently, the burden on those with low income are four times as great as those with high income,” said Ames. “This will move us in the direction of fairness.
But New Hampshire has never has had a tax on capital gains, emphasized Abrami.
“This is an attack on business creation, a tax on risk-taking. Those who invest can win big and lose big. New Hampshire will not share in the losses but take 5 percent of the gain. This is not fair at all. It sounds like a redistribution of wealth,” he said.
“It will result in a tax cut at the lower end of the spectrum. I does increase the burden on the higher end of the spectrum. That’s the way it should be,” Ames responded.
The House passed that bill, 199-143.
Both HB 623 and HB 686 will are now headed to the House Finance Committee and the full House will need to vote again before they are sent to the Senate.