(The Center Square) – New Hampshire lawmakers are considering a proposal to reduce the state’s business profits tax, but the move faces pushback from critics who say it will only benefit large corporations.
During a hearing before the Senate Ways and Means Committee last Wednesday, lawmakers were urged to approve a plan to cut the state’s business profits tax from 7.6% to 7.5% for most businesses beginning in 2023.
Republican leaders say there is more than enough money coming into the state to offset the loss of tax revenue, and that pandemic wary businesses would benefit from a tax break.
“Business taxes are $28 million, and year to date revenue is $239 million ahead of plan,” Sen. Bob Giuda, R-Warren, the committee’s chairman, said during the hearing. “There is more than enough to take a one-twentieth of 1% cut in the tax.”
Democrats oppose the changes, suggesting the proposal would limit the ability of the state government to fund its operations.
“Our business taxes have reduced year after year after year,” Sen. Lou D’Allesandro, D-Manchester, said in remarks. “How far down do you think business taxes have to go to be competitive?”
But a new report by the New Hampshire Fiscal Policy Institute, a conservative think tank, suggests that the proposed reduction would disproportionately benefit a small number of large profitable corporations, while the vast majority of businesses paying the business profits tax would see a relatively small tax reduction.
“Past New Hampshire business tax reductions do not appear to have spurred significant new economic growth, including economic growth substantial enough to offset the revenue lost due to tax rate reductions,” the report’s authors wrote.
New Hampshire has cut the state’s business profits tax several times over the past several years from a high of 8.5% in 2016.
The state Department of Revenue Administration estimates that the proposed reduction in the tax rate would cost the state $17.5 million over the next several fiscal years with an ongoing loss of about $8.4 million a year after 2025.
A two-year, $13.5 billion budget signed by Gov. Chris Sununu last year reduced the state’s business enterprise tax from 0.6% to 0.55% and lowered the threshold to pay business taxes, which means fewer businesses will be paying the levy.
Despite the cuts, New Hampshire’s booming economy has continued to fill its state coffers with excess cash drawn from business taxation over the past year, state data shows.
Still, business tax collections totaled $24.5 million in February, about $3.4 million below state budget writer’s estimates, and $4.9 million below last February, according to the latest data from the state Department of Revenue Administration.
The agency attributed the drop in business tax receipts for the month to larger-than-anticipated refund requests by corporations, noting that business tax collections are typically much higher in March, April and June.
“Business taxpayers are signaling an expectation of higher current tax period liability, as demonstrated by an increase in estimated tax payments of 17 percent as compared to February of 2021,” the agency said in a report.
Overall, the state has collected $584.9 million in business taxes year-to-date, which is about $121.3 million more than a year ago, according to the agency.