NH Opinions: A legislative agenda for N.H.’s business community

The Legislature is back in town, and already the New Hampshire High Technology Council and the business community at large is taking an extremely close look at the projected $300 million state budget deficit and its implications for business taxes as well as any piece of legislation with a price tag.

The state is losing $180 million in Medicaid funding, state education funding is coming up short and New Hampshire’s new governor, John Lynch, has pledged not to propose a broad-based income or sales tax.

If the legislative history of recent years is any guide, when New Hampshire state budget-writers finish cutting state agency requests, they turn to the business community when hard-pressed to come up with revenues to balance the state budget. New Hampshire businesses already pay a business profits tax of 8.5 percent and a business enterprise tax of 0.75 percent, which can be taken as a credit against the BPT.

The business community is anticipating that some lawmakers in Concord may propose raising those taxes or eliminating the BET credit as they scramble to fund state government. Business leaders are making the argument that business tax increases would slow down economic recovery in the state, and that business is already doing its fair share of funding state government.

The other likely source of new revenue is the cigarette tax. New Hampshire has the lowest cigarette tax of any New England state at 52 cents. Maine is at $1, Vermont at $1.19, Massachusetts and Connecticut at $1.51 and Rhode Island leads the pack at $1.71. A campaign by the New Hampshire Healthy Families Campaign proposes a $1-per-pack increase in the cigarette tax, which they estimate would raise $134 million.

New Hampshire retailers along the state’s border oppose the increase, arguing it would cut their sales to customers who cross the border to buy the cheaper cigarettes.

Against the backdrop of the state budget deficit, which will drive a lot of decisions at the State House in 2005, are three other issues important to the high-tech business community in New Hampshire: health insurance costs; tort reform; and R&D tax credits.

Health insurance is the issue that dominates all others. Insurance premium increases of 10 to 100 percent year after year, with some increases over 200 percent, are driving some small businesses in the state to cut coverage to their employees or eliminate it altogether.

Governor Lynch made the issue a centerpiece of his campaign, promising to get rid of what many see as one of the culprits in those increases — Senate Bill 110. The health insurance “reform” legislation ended community rating for determining small employer premiums in the belief that it would increase competition among health insurers, many of whom had left the state.

While some insurers have returned to New Hampshire, the renewed competition has not brought rate increases to a reasonable level for many small businesses, despite an effort by lawmakers to cap premium increases. Legislation to repeal SB 110 is in the works.

One of the other culprits is medical injury claims litigation.

A revived bill from the last session would set up a screening panel to review medical injury claims before they reach the courts. The panel would determine which claims are legitimate and try to settle them out of court.

If necessary, the panel would make recommendations to the court. Based on success in Maine, the expectation is that screening potentially expensive medical injury claims out of court will result in less cost to the system and help control spiraling insurance premiums.

Finally, the High Technology Council, along with other business organizations, will once again support R&D tax credit legislation, which also died in the last legislative session.

The credit would be on wages paid to a company’s employees involved in R&D and would amount to a 15 percent tax credit against the company’s business profits tax obligation, as long as it didn’t exceed 5 percent of the total BPT obligation.

New Hampshire lost more manufacturing jobs per capita in the past three years than any other state. The R&D tax credit is just one of a number of efforts under way to help revive that sector.

The leadership for achieving this legislative agenda will fall to New Hampshire’s business community, which is already organized and has already met with Gov. Lynch and several legislative leaders.

Fred Kocher is the president of the New Hampshire High Technology Council, based in Peterborough.