What do business tax cuts mean to New Hampshire business owners?
The latest cuts destroy the state’s future ability to sustain or attract business
Most of our businesses pay little or no business profits or business enterprise tax – but a lot of property tax. During the last three decades, most of New Hampshire’s state budgets have reduced real investment in the needs of businesses and their workforce.
The tax cuts begun in late 2016 will cut budget revenues further by about 10 percent by 2022, making the situation much worse. What does this mean for you?
Workforce is our state economy’s biggest problem, present and especially future, in our aging state.
It has been aggravated first and foremost by major substance abuse problems – the opioid crisis, but also chronically high untreated alcoholism and other addictions that make workers un-hireable or unproductive.
Decades ago, legislative budget writers began to cut real wages of substance abuse treatment providers by allocating them less Medicaid money than required by the demand, and taking away money the Legislature had designated for a treatment and prevention fund. We lost most of these treatment providers years before the opioid crisis hit the newspapers. Now, unfortunately, many older and younger workers and potential hires are trapped in addiction.
To a lesser extent, the rest of the health system safety net has also seen Medicaid cost-cutting, undermining the productivity and participation of lower-income workers we all depend on. Medicaid expansion has mitigated this problem, but it will need more money, and it expires in 16 months if not renewed next year. It is a battle we may lose unless every citizen weighs in.
It has become too expensive to build new housing that young people can afford, and our zoning and building regulations make it much easier to build for the already wealthy. Yes, the new budget used $2.5 million of the one-time surplus for affordable housing programs, but our neighboring states consistently commit many more millions to create, and support, workforce housing.
State programs to incentivize downtown development that attracts Millennials are poorly funded, because we have to dedicate spending to the most immediate needs. And job training programs for new and old citizens alike got short shrift in this budget year.
The property tax hangs like a dead weight around the necks of businesses and households alike. When the state underfunds or defunds past programs for downtown development, senior care, schools, the homeless, employee retirement, child care, the arts — towns must choose to lose quality of life or pay for it themselves. Sometimes by statute there is no choice allowed.
And property taxes keep rising. According to the business-funded Council on State Taxation, in 2015 New Hampshire-based businesses paid more in property tax than any other state or local tax. The property tax burden was over twice that of the BPT and BET. And state excise taxes, all affecting particular businesses (meals and rentals, tobacco, insurance, building sales) were a quarter of the tax burden.
Two decades ago, our government agencies had a well-deserved reputation for customer service and sensible and light regulation. The temporary staffing cutbacks of the Great Recession were greatly increased in 2011, and have been only slightly mitigated since. Benefits have been cut, but salaries, most of which had been below market rate, were kept low.
What happens when you slash the public workforce is that many good employees move on or retire early, leaving others desperately trying to hold things together. That creates a toxic situation to try to recruit into, and we are hearing more and more complaints about bureaucratic practices.
Business depends on a well-working state government. But it is getting tax cuts instead.
The new biennial budget’s tax cuts destroy the future ability to sustain or attract business in this state. The BPT and BET are about 40 percent of our general and education revenues, and the basis of our ability to pull in federal grants to complete the rest. Last term, the budgeters pioneered business tax cuts that phased in at the very end of the budget period, hiding the damage they are doing.
New Hampshire had a revenue spurt in 2016, when only 1.1 percent of the first tax cut had occurred. The state's revenues always lag the rest of the nation in recovery from recessions, and since the 2016-17 budget did not predict the increased revenue, it cut more services, and we ended with a large surplus in both 2016 and 2017. But in 2017, with a 3.7 percent cut in place, there was no growth in business-tax revenues at all.
Each year until 2022, the tax cuts will grow, and revenue loss will expand. The new budget triples the total damage through 2022, ending by costing us nearly 10 percent of our entire revenue base, plus the concurrent federal moneys. To avoid this, our economy would have to grow by 7 percent every year.
Few New Hampshire-based businesses pay the taxes cut. Less than 1 percent of BPT filers pay 75 percent of the tax, and 58 percent is paid by international companies. The BET is a small percentage with a significant floor and mostly affects large low-margin enterprises. International companies pay 48 percent of it, 4 percent of filers pay 75 percent and two-thirds pay $0 to $500. Many more businesses do not file at all.
When Gov. Walter Peterson launched our economic miracle in 1970 with major tax reform, he made that reform revenue-neutral, preserving and enhancing the then-poor state's ability to serve its businesses and people. Today's budget writers have traded our business environment and quality of life for an ideological theory. Go look at Kansas if you want to see how that works.
Fiscal responsibility means funding what our state's citizens and economy need, at a level that restores and sustains necessary services as cheaply but efficiently as possible over time. The Old Republicans were doing that, and we learned from them. What the New Republicans are doing is irresponsible.
Susan Almy of Lebanon, Rep. Edward Butler of Harts Location and Sen. Dan Feltes of Concord are Democrats in the NH Legislature.