Realities loom for Republican majorities

Will the sea change that has resulted in veto-proof Republican majorities in the state House and Senate next legislative session mean much to business in New Hampshire? That may seem like a stupid question, but the answer is complicated.Of course, Republicans ran on making the state more business-friendly by cutting taxes and fees. Aren’t a lot of them businesspeople themselves?There will be an effort to “repeal all the crap the Democrats have been doing in the last few years,” in the words of Rep. Gary Daniels, R-Milford, House labor committee chair from 1997 to 2000 and a possible candidate for the job this time around as well. But it’s unclear whether budget constraints will allow them to do that, and whether repealing “the crap” will actually make a difference to most businesses.While individual lawmakers are calling for various business tax rollbacks, Sen. Jeb Bradley, R-Wolfeboro, who will be majority leader, cautions, “While competitiveness is the goal, we all know we have a $650 million – or more – budget gap. In this budget, the best we might be able to do is to do no more harm to business.”But doing no harm is easier said than done. Even if lawmakers do manage to cut spending to rein in taxes, some spending cuts could be devastating to some business groups. For example, avoiding a gas tax increase might starve the highway fund and paving contractors. Or holding the line on Medicaid could kill small hospitals and shift costs to those with private insurance, resulting in higher premiums for employers.All that said, the Nov. 2 election did result in a major shift in the state’s political landscape. Here are just a few of the areas to watch in the coming years.Spending and taxesIf lawmakers agree, the action this year will be in both ways and means committees.In the Senate, incoming Senate President Peter Bragdon, R-Milford, has already named Sen. Bob Odell, R-Lempster, a business-friendly lawmaker to be sure, but not a tax-axer. Indeed, Odell worked well with Democrats when they were in the majority.For the Senate Finance Committee, Bragdon has already named Chuck Morse, R-Salem, chair of the panel before he left the Senate in 2006, to his old position.Apparently, experience trumps zeal in the Senate. If that’s the same case in the House (and that partly depends on the speaker’s race), then former chair Norman Majors, R-Plaistow, would be in charge of ways and means and Neal Kurk, R-Weare, would take charge of finance.But no matter who is in charge, the general feeling is to hold the line on tax increase of any kind.”I think increased taxes and fees to business, are completely off the table,” said Curtis Barry, a lobbyist who represents the Retail Merchants Association of New Hampshire. “And I say that with a straight face.”But will Republicans go beyond that, and actually roll back taxes?Here are a few specifics under consideration:• Rep. Frank Sapareto, R-Derry, has put in a request for a bill to expand the “safe harbor” for “reasonable compensation” under Department of Revenue Administration audits for owners of a partnership, LLC and sole proprietorship as related to the business profits tax.The DRA has contended that some business owners have been paying themselves too generously to avoid paying the BPT. The legislative fix last year was a $50,000-a-year safe harbor in executive salaries before the DRA can question compensation.Sapareto would bring back the bill sponsored last year by Bradley that would, in Bradley’s words, “revert to the prior standard … that is the most rational way to do it.””The $50,000 level is absurd, no question about that,” says Bob Nash, president of the New Hampshire Association of Insurance Agents.• Sapareto also would cut the business enterprise tax on interest paid on loans. This could be a big deal on heavily leveraged companies.• Look for the Business and Industry Association of New Hampshire to revive legislation for research and development tax credits and to extend the period to carry-forward losses.• A sales tax may have been off the table, but now it looks like it isn’t even on the floor. Barry, representing the retail merchants, notes the political shellacking that Rep. Gilman Shattuck, R-Hillsboro, took over his sponsorship of a sales tax in the last election.Not only did Shattuck lose his re-election bid, but he was edged out by a Democratic challenger. But the retail merchants are updating their data and adding the effect of a sales tax on commercial real estate and municipal revenues in case anyone revives a sales tax proposal.• There will be a move to roll back the cigarette tax, one of the main revenue engines under Democratic rule. Rep. Ken Weyler, R-Kingston, would cut the tax by 20 cents to $1.58 a pack. This is a key demand of the New Hampshire Retail Grocers Association, which has maintained that raising the tax has slowed border sales and cut state revenue on other taxes. • Insurance lobbyist Nash says he would like to see an extension in the reduction of the insurance tax to 1 percent. It was gradually – a quarter percent at a time – to be cut in half to 2 percent in order to attract major insurers into the state. It’s now stuck at 1.25 percent because lawmakers have held off looking for any revenue to balance the budget.• The New Hampshire Lodging and Restaurant Association would like to roll back the recent increase in the rooms and meals tax. But for the hospitality industry, that’s a double-edged sword, since the state Division of Travel and Tourism’s budget is now tied to income from that tax. Still, Henry Veilleux, a lobbyist for the NHLRA, said that lower taxes would attract more customers, increasing the tourism budget.• The 10 percent tax on gambling winnings is another target for extinction. Several lawmakers already wanted to reform it to at least allow the deduction of losses, but said that they would attempt to get rid of it whole hog if Republicans captured enough seats. They are betting that 298 in the House and 19 in the Senate is enough. Gaming industry lobbyist Rick Newman argues that the loss of big out-of-state bettors at the tracks is wiping out any revenue gain, but he predicted that lawmakers might leave the gambling tax in place for lottery winners who are unlikely to flee out of state.As for casino gambling, Newman and several others say that it is unlikely, even with a raft of new legislators. Morse, although a supporter, simply doesn’t have the passion for it that Lou D’Allesandro, D-Manchester, had when he headed the Senate finance panel.”I see very small changes…maybe a expansion of charity gaming,” Newman said.Health careThere is nothing the state can do about federal health-care reform laws coming down the pike. That’s a Washington fight, with President Obama wielding a presidential veto.However, the legislation still leaves a lot of room for the state to maneuver – decisions to make and consequences to deal with, such as what to do if many employers drop their coverage and simply pay the lower-cost penalty for not providing any insurance.For one, it appears that the federal legislative mandate of what the state should require – at least at this point – is rather thin, meaning that the state might revisit nearly every mandate it has passed in last decade or so. That’s what Rep. John Hunt, R-Rindge, said he would focus on if he ever regained the chair of the House Commerce Committee.Bradley said that the state would look to allow groups to purchase health-care insurance across state lines, allowing insurers to purchase lower-cost insurance with fewer mandates.EnergyBradley, incoming Senate majority leader, would like to bring back the days when he chaired the science and technology committee in the House before he left for Congress.”Then the focus was like a laser beam on costs,” he said.Republicans would like to audit the Regional Greenhouse Gas Initiative to make sure whether using the money on conservation really helps lower energy bills.As to whether the state will pull out of the RGGI altogether, “I think there will people that will look at that,” said Bradley.But utilities may not want to see a total overhaul of RGGI, since they have already made investments in the program.Likewise, look at Republicans to reexamine the Renewable Portfolio Standards. Bradley said he thinks the focus has been too much on subsidizing solar energy, and that there are more jobs in hydro and wood.Bradley didn’t mention that 1.2-gigawatt gorilla, a proposed project that would bring in hydro power through Hydro-Quebec. Would that be included as part of the new standards?LaborThe big question here is whether Republicans would move to lower the employment tax if the jobless rate goes down.Rates skyrocketed as the unemployment fund reached dangerously low levels, and lawmakers under the Democrats made it harder for the tax to go back down as the situation improves, so the fund would have a bigger cushion this time around.But Republican lawmakers might revert to the old days and sacrifice that cushion for a lower tax rate.Democrats also passed a number of initiatives that expanded the pool of people eligible for unemployment insurance benefits. The law providing benefits to part-time employees is likely to stick, but others – such as allowing people to collect unemployment because their spouse took another job – might be revisited, particularly if the federal carrot of more aid is no longer attached.Lawmakers also might revisit Democratic reforms that narrowed the definition of an independent contractor. The number of criteria was increased from five to 11, and lawmakers might roll that back.But some contractors have supported the reforms, saying it levels the playing field.”Those who talk about wanting to level the playing field, want to tilt it in their favor,” said Rep. Daniels of Milford, former chair of the House labor panel.And then there is the perennial right-to-work bill, which has failed under Republican majorities in the past.But, said Rep. Will Infantine, R-Manchester, “I do think it has a shot. This is the best time ever that it has of passing.”Bob Sanders can be reached at