NH Republicans Aim to Boost Economy by Lowering Key Business Tax Amid Declining Revenues
In recent years, New Hampshire has seen a gradual decrease in its business tax rates. This trend is set to continue as lawmakers are pushing for a further reduction. A proposal is on the table to cut the business enterprise tax (BET) from 0.55% to 0.5%. This proposal, known as House Bill 155, is headed for a vote by the full House in January.
Proposed Tax Reduction Details
The Ways and Means Committee recently voted along party lines to advance House Bill 155, aiming to implement the first business tax cut in three years. The cut is significant because Governor Kelly Ayotte had previously indicated no intention of lowering the business enterprise tax in her budget, emphasizing the importance of the current revenue structure.
Arguments For and Against the Tax Cut
Supporters of HB 155 argue that reducing the tax rate will benefit businesses by allowing them to retain more profits. This retention is seen as vital for stimulating growth, job creation, and innovation within the state. Rep. Joe Sweeney, the bill’s sponsor, stated that tax reductions lead to better wages and increased job opportunities.
- Key supporters include:
- New Hampshire chapter of the National Federation of Independent Businesses
- Americans for Prosperity
Conversely, opponents highlight the potential negative impact on state revenues. With revenues down 10.4% from expectations and 8.8% lower than previous year levels, they argue that any reduction in business tax could worsen the financial situation. Rep. Susan Almy criticized the move, explaining that the timing is questionable given the state’s current revenue challenges.
Financial Impact and Revenue Trends
Data reveals that while business tax revenues have generally risen since tax cuts began in 2015, there is concern over the sustainability of this growth. An analysis by the New Hampshire Fiscal Policy Institute suggests that the state could have lost between $795 million and $1.17 billion in potential revenue due to these cuts from 2016 to 2024. As each tax reduction has been enacted, BET revenues have often declined, contrary to the trend of total compensation paid.
Democrats argue that national economic factors, rather than state tax policies, have primarily driven revenue growth. They urge caution, especially as potential tariffs could further impact revenues. Meanwhile, suggestions have arisen for targeting relief more effectively, potentially by raising the lower threshold for tax exemptions to exclude small, struggling businesses from the overall rate reductions.
Next Steps for House Bill 155
The amendment to HB 155 would mean the tax reduction will not take effect until January 2027, applying to businesses in the 2027 calendar year. This timeline ensures the new rate would be in force when businesses file taxes in April 2028. As the debate continues, both sides remain firm in their respective positions regarding the efficacy of tax cuts in fostering economic growth.
