Tax-related items still must be hashed out in Senate, House budget talks
BPT, BET rate freezes, paid family and medical leave deduction among the issues
The budget passed by the New Hampshire Senate on June 6 contains several tax-related items. But whether any or all of them remain in the budget that will be hashed out with the House in a conference committee – and pass Gov. Chris Sununu’s scrutiny – remains to be seen.
Among them are:
Halting business tax cuts
The different budgets approved by the House and Senate both support halting planned business tax cuts. The governor has hinted he might veto the budget over this issue.
Democrats call it a tax freeze, while Republicans say it is a rollback, or even a tax increase. The business profits tax rate was 8.5% in 2016, but lawmakers in a Republican-dominated Legislature reduced it to 7.9%. Republicans also established further BPT cuts to 7.7%, which went into effect at the start of this year, and eventually to 7.5% in 2021. Similar cuts in the business enterprise tax were also enacted.
Proponents of the changes included in the House and Senate budgets – which would retroactively repeal the latest round of cuts – call it a freeze because nobody will actually pay 2019 rates until next year, though many did start making estimated quarterly payments in April. Republicans say that businesses started the year thinking that they will be taxed at one rate, would end up paying a higher rate: therefore a tax hike.
Paid family and medical leave payroll deduction
The House and Senate also included this in their budgets, but the governor threatened a veto because of it.
Governor Sununu has called paid family and medical leave an income tax, since it is based on a half-percent mandated payroll deduction in order to provide 12 weeks of paid leave at 60 percent of income. Democrats, while agreeing that the program is a mandate, emphasize that the payroll deduction is optional. They say businesses can pay for their own paid family and medical leave program, contribute to the statewide program or just let their employees pay for it.
“Anyone who calls it an income tax is flat out misrepresenting the legislation,” said Sen. Dan Feltes, D-Concord.
Capital gains tax
The House included a capital gains tax in its budget, the Senate left it out, and the Governor is strongly opposed.
Proponents say that the tax just closes a loophole by extending the 5 percent interest and dividends tax to capital gains. Further, the measure would greatly increase exemptions, meaning small investors would be getting a tax cut. Republicans just call it a new tax.
A provision in the budget not only defines e-cigarettes for the purpose of regulation, but also taxation.
System benefits charge
A measure included in the budgets would allow the Public Utilities Commission to increase the system benefits charge on electric bills, without legislative permission, to enhance energy efficiency. Supporters say that the authority would lower peak demand and actually save ratepayers money, but opponents call it a tax on ratepayers.