When the creation of a Business Enterprise Tax (BET) was being debated by the New Hampshire legislature in 1993, Democratic State Sen. Beverly Hollingsworth of Hampton raised a prescient question.
“Many fear that the low rate of only a quarter of one percent (0.25 percent) is just a starting point (for the BET). That while we soon have to deal with the Medicaid money disappearing, we may find ourselves with a $150 million (deficit) that we need to find to plug the hole.”
Her Republican colleague, David Currier of Henniker, had the same concern.
“That quarter of one percent is not much right now,” he told the Senate of the proposed rate. But as pressure rises for more state spending, he asked, “Does that quarter of one percent then become a half of a percent? One percent? Three percent? Ten percent? I am not sure, and that scares the hell out of me.”
In fact, the BET rate eventually tripled, reaching 0.75 percent by 2016. That’s when Republican lawmakers passed a series of reductions — over the objection of then-Gov. Maggie Hassan (D), who vetoed the budget and forced the state to operate under a continuing resolution in her attempt to block business tax cuts.
Eventually, the GOP prevailed. Since 2016, the BET has fallen to 0.55 percent — a significant decrease, but still more than twice as high as the original rate. Republicans want to reduce it again to 0.5 percent by the end of 2027. Democrats continue to say “no” to cutting business taxes, as they have since 2016.
Last week, the House Ways and Means Committee voted along party lines to pass the proposed reduction.
Democrats argue that business taxes “cost” the state too much money and, with the state already running behind on revenue for its budget plan, further cuts would be a mistake.
“If you consider inflation, our revenues have been going down by almost a billion dollars since this (business tax cuts) started in 2016,” claimed Rep. Susan Almy (D-Lebanon), the ranking Democrat on the committee.
However, the Josiah Bartlett Center for Public Policy points to the state’s own data showing that, from fiscal year 2015 to 2023, business tax revenues have more than doubled, increasing by 124 percent. That is far above the rate of inflation and a true net increase in revenue.
Democrats point to an analysis from the left-leaning New Hampshire Fiscal Policy Institute (NHFPI), which argues that while revenues have increased, they would have increased even more if the higher tax rates were left in place. NHFPI claims that any money the state didn’t collect from businesses due to tax cuts was “lost” to the New Hampshire government.
And, they say, “we’re in the rainy season.” Sen. Cindy Rosenwald (D-Nashua) has already proposed raiding the state’s rainy day fund to comply with the Supreme Court’s order to increase state education funding.
Republicans say that money earned by businesses is their money, not the state’s, and when citizens keep their own money, nothing is “lost.”
During the Ways and Means Committee hearing, Almy said cutting the business tax would strip cities and towns of revenue and lead to higher property taxes.
“It’s an extra amount that takes money away from services that are needed by the towns, and therefore the towns have to go and raise their property taxes again, and then the town councils get blamed,” Almy said. “Select boards get blamed for raising the taxes. I hope that we will be able to do something about this in the near future.”
Again, the Josiah Bartlett Foundation points to state data showing a $214 million increase in local aid from the state between 2015 and 2024. And total state aid to public school districts rose by $148 million (15 percent) during that time.
Still, members from both sides of the aisle share concerns about state revenue covering the current spending plan. And Gov. Kelly Ayotte has said publicly she doesn’t support any changes in the state’s current tax rates.
The original proposal was to reduce the BET as of January, but Republicans offered a proposal that would push the start date back to January 2027.
“We need to delay this for a year to see whether or not we implement it,” said Rep. Jordan Ulery (R-Hudson). “I hate to use the phrase, but (we’re) literally kicking the can down the road to see what happens. And that’s what we kind of need to do in this particular environment.”
Greg Moore with Americans for Prosperity says the business tax cut is needed to help the state’s small businesses.
“The Business Enterprise Tax targets small businesses, so giving these critical employers tax relief is critical to growing our economy from the bottom up. Moreover, since the BET is a payroll tax, it puts downward pressure on wages for small businesses across the state.
“BET tax relief means more economic growth and higher wages. Opponents will have to let working families know why they think government deserves this money more than hard-working Granite Staters.”
John L. Reynolds, NFIB’s New Hampshire State Director, agrees.
While optimism is slowly improving among small business owners, uncertainty about future economic conditions remains high,” Reynolds to NHJournal. “One of the biggest challenges continuing to plague Main Street employers right now is finding qualified employees to keep up with customer demand, help grow the business, or just keep the doors open. Nearly ninety percent of small employers who are trying to hire say they get few or no qualified applicants for open positions.
“Taxes on employment, like the Business Enterprise Tax, make it harder and more expensive to find, retain, and pay the right person for the job. Tax relief for small employers helps them hire, invest in their operations, and contribute more to their communities. Fiscal restraint in the state budget and pro-growth reforms that help Main Street thrive will benefit the entire Granite State.”
