Lost amid all the political and economic news this month was an important bit of particularly noteworthy data as the 2024 governor’s race gets underway. (Yes, already.)
The state’s fiscal year ended in June. When it did, the state posted a General and Education Trust Fund surplus of $538.9 million.
When revenues exceed budgeted expenses by more than half a billion dollars, that’s notable. Large budget surpluses have become so commonplace, though, that they barely prompt a blurb anymore.
And this is after multiple rounds of business tax cuts that critics said would devastate the state budget and leave New Hampshire with too little revenue to fund basic services.
The surge in business tax revenues (which we documented last year) is one of New Hampshire’s most important economic (and political) stories of the last decade.
It hasn’t stopped. Business tax revenues for the 2022 fiscal year were $323.2 million (or 33.7 percent) above plan and $68 million (5.6 percent) above the prior fiscal year.
Looking back to 2012, it’s remarkable how state General and Education Fund revenues have grown. Total revenues for both funds were $3.23 billion in the 2022 fiscal year. In 2012, they were $2.16 billion.
Inflation (using the national Consumer Price Index) can account for $663 million of that $1.068 billion revenue increase. The rest, about $404 million, is new money.
This month’s other big economic news was achieving a new record-low unemployment rate of 1.8 percent. New Hampshire’s economy is churning out jobs and revenue. This isn’t all because of the business tax cuts that have occurred since 2015, but they’ve helped. And the phase-out of the Interest & Dividends Tax by 2025 will help more.
While New Hampshire is enjoying these successes, other states are showing why punishing successful residents with high tax rates is a bad idea.
In Massachusetts, the new 9 percent income tax rate for millionaires helped to push Celtics star Grant Williams to seek a trade to low-tax Texas.
In April, a new 4 percent surtax on homes worth more than $5 million took effect in Los Angeles. Movie stars including Mark Wahlberg and Brad Pitt rushed to sell homes before the tax took effect, and since April 1, the supply of homes worth more than $5 million has plunged as owners pulled their listings, according to The Hollywood Reporter.
California legislators in June had to cover a $32 billion budget shortfall caused by rising spending and falling revenues. Massachusetts is dealing with declining revenues, and current spending proposals for the new fiscal year exceed revenues by about $500 million.
Keeping taxes and spending low is paying off for New Hampshire’s economy and the state budget. Having the latest state data confirm that fact yet again, as poster-child progressive states spend beyond their means and send rich residents fleeing, is a good starting point for the governor’s race.