The bill projects to produce an additional $36.6 million in 2020 and $55.5 million in 2021 in tax revenue, according to its fiscal note. Soucy said the legislation assumes the state’s economy continues along its current trajectory, boasting the nation’s second lowest unemployment rate at 2.5 percent, according to the Bureau of Labor Statistics. In total, the legislation estimates business tax revenue would generate nearly $750 million year-over-year by maintaining the current rates.
“The bill assumes no significant economic swings in one way or another,” Soucy said. “We see stabilizing the rates as the final stage of the business taxes being reduced. Businesses have seen the benefit of the reduction. There isn’t much in the governor’s (proposed) budget in terms of property tax relief for families, so we see this as a way to benefit both businesses and families.”
The additional revenue would then be distributed to the state’s cities and towns via the Treasury Department using a formula based on a municipality’s size, the amount of property taxes paid in a given community and an equalization of the value of property Feltes, said. The bill is supported by the New Hampshire Municipal Association, which sent representatives to testify on behalf of the bill in committee, according to the association’s Feb. 15 “Legislative Bulletin.”
“This bill accomplishes two things,” said state Sen. Jon Morgan, D-Brentwood. “We’re halting further cuts to the business profit tax and business enterprise tax, and prioritizing who should get tax relief. I can’t tell you how many individuals who I have spoken with who tell me they are getting priced out of their homes because their property taxes are too high.”
The benefit to municipalities would be significant. For instance, Exeter Town Manager Russ Dean said Exeter previously received roughly $280,000 in additional revenue sharing from the state to offset the property tax rate of 7.25 percent at the time, before the practice was ended by the Legislature. Another bill before the Legislature would restore 15 percent of state contribution to municipal employee retirement costs, meaning the state would kick in nearly $270,000 out of Exeter’s total obligation of nearly $1.8 million in 2019.
″(State retirement contributions), plus general revenue sharing would mean approximately $550,000 annually back to us,” Dean said. ”(It’s) a significant chunk of money which would be used to lower the tax rate.”
Dean added revenue sharing would potentially benefit a community undergoing a major capital project such as Exeter’s new $53.8 million wastewater treatment facility, which the town receives 5 percent of the project cost, or $2.7 million. Dean said if the contribution was increased to 20 percent, it would result in an additional $8 million to $10 million reduction in cost to Exeter ratepayers.
Morgan said the legislation was filed in part as a response to Sununu’s business tax cuts, which Democrats have argued continued to downshift costs onto cities and towns in order to subsidize the tax benefits to businesses and large corporations.
“The assumption is the (economic) stabilization has already occurred. This bill is not costing the state any additional money and it is not a tax increase,” Morgan said. “We’re making sure hard-working Granite Staters are getting the property tax relief they need, rather than the tens of millions of dollars we’ve given away to the wealthiest out-of-state corporations by cutting the business profits tax and business enterprise tax.”
In response, a representative from Sununu’s office said the governor does not support SB 301 as currently written, and viewed it as an attempt to undermine his agenda in pursuing lower business taxes for New Hampshire companies, which he attributed to the economic growth the state has enjoyed under his tenure.
“A healthy business cycle is predicated on certainty. Our businesses small and large order many of their affairs according to our government’s long term plans - it is irresponsible governance for the Legislature to ping pong core tax policies every two years,” Sununu said in his state budget address Feb. 14. “High taxes come at the high cost of the erosion of our state’s economic competitiveness. We should not, and cannot turn back now.”
Sen. Bob Guida-R, Warren, also a member of Ways and Means, said because SB 301 halts further reductions in the business profits and business enterprise taxes that statutorily went into effect Jan. 1 under Sununu’s tax cuts, the proposed legislation does amount to a tax increase. He said he was in favor of restoring municipal revenue sharing, but did not provide a specific policy proposal on how to do so until the Senate voted on other bills that together added $10 million in spending outside of the proposed budget.
“I believe we can do both in leaving the tax reductions in place and give money back to the municipalities with a solution that’s much less onerous on businesses,” Guida said. “The economy isn’t broken, it’s roaring. I say if it isn’t broken, don’t fix it. Businesses are operating on 3-, 5-, 10-year projections and those are based on certainty.”
