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House GOP members say their new plan to cut taxes will help Granite State families thrive. Democrats denounced the tax cut plan as a $350 million corporate giveaway.

Familiar battle lines were drawn in Concord on Tuesday when Rep. Joe Sweeney (R-Salem) presented the GOP’s Consumer Tax Relief Act to the House Ways and Means Committee, calling it a “beacon of hope” for New Hampshire’s struggling businesses and communities.

“(This is) a crucial piece of legislation that not only reflects our commitment to fiscal responsibility but also addresses the pressing needs of Granite Staters in these challenging economic times,” Sweeney said. “Month after month, Granite Staters are grappling with the rising expenses that are stretching their budgets to the breaking point. In these times, when factors beyond our control are making life harder for our people, it is imperative that we take decisive action to provide relief where we can. One of the most effective ways we can do this is by cutting taxes here in New Hampshire, and that is precisely what the Consumer Tax Relief Act aims to achieve.”

The bill reduces the Business Profits Tax rate by 0.1 percent a year from 7.5 percent to 7 percent by 2030. It takes a similar approach to the Business Enterprise Tax rate, lowering it from 0.55 percent to 0.35 percent over the same period. It also cuts the Meals and Rooms Tax rate from 8.5 percent to 6.0 percent by Fiscal Year 2027.

And the proposal would also phase out the Communications Services Tax Granite Staters pay on their “two-way communication services” (wireless services and cellphones), which are currently taxed at seven percent. Under Sweeney’s proposal, the tax would be reduced over time and eventually eliminated by 2027.

House Democrats released a statement Tuesday claiming the tax cuts only benefit “multinational corporations” and would lead to defunding critical services like the Department of Safety, the Veterans Homes, Child Protective Services, and Community Colleges. 

Rep. Susan Almy (D-Lebanon) pushed Sweeney about the economic impacts, saying the tax cuts would be a disaster for state government agencies that rely on the funding.

“Do you understand what this does to the state government, which is suffering from the same inflation everybody else is?” Almy said.

The tax cuts would have a net positive impact for everyone, Sweeney countered. Cutting the business taxes would lead to more business investment and economic growth. Eliminating the Community Services Tax and cutting the Rooms and Meals tax will make New Hampshire more competitive with Massachusetts and foster more economic activity. Overall, the cuts will help generate more tax revenue for the state by boosting economic activity, he said.

“We’ve seen successful tax cuts in New Hampshire increase revenues,” Sweeney said.

New Hampshire’s GOP-controlled legislature already cut business taxes, and it is in the process of phasing out the state’s last remaining income tax — a tax on interest and dividends income. Sen. Dan Innis (R-Bradford), who led the charge to end the interest and dividends tax, wants caution exercised with any tax cut proposals.

“We have to be careful this year with what we want to do,” Innis said.

New Hampshire’s generally strong economy is showing some soft spots, Innis warned. Revenue may not be where it was a few years ago and there are early signs that could be trouble. For example, the real estate transfer tax might be lower than in previous years due to the restrictive housing market, he said.

New Hampshire weathered the economic turbulence created by the COVID pandemic, coming through with higher than anticipated revenues and a healthy rainy day fund, Innis said. Voters expect Republicans to be responsible with their money.

“I support cutting taxes where possible, but it’s a balancing act,” Innis said.

Sometimes, that means returning taxpayer money to help spur economic activity, and sometimes, that is deferring spending on big-ticket projects, Innis said. A $40 million proposal for municipal roads and bridges may need to wait, he said, especially after the state provided funding in the last session.

“We want to provide that support if we can,” he said. 

New Hampshire lawmakers only have until Thursday to finalize what the final state budget will look like for the next biennium, but there are two issues that could hurt its chances of getting passed in the full House.

One of the policies is not even related to monetary funds, it’s about a family planning contracts provision that was hotly contested in the Senate version of the state budget last month.

The Senate added language to its budget prohibiting the state from giving money to health care facilities to provide abortions. Republicans argued the language simply codifies current practice under the federal Hyde Amendment, but Democrats called it an attack on women’s health.

“The decision by House conferees to accept the Hyde amendment as part of the state budget proposal is a completely unnecessary attack on women’s health,” said Rep. Mary Jane Wallner, D-Concord, ranking Democrat on the House Finance Committee and a budget conferee.

“Because federal law already prohibits the use of tax dollars on abortion services, this amendment is a political statement, not a budget statement,” she added.

A conference committee is working to compromise on differences between the $11.8 billion budget passed in the Senate and an $11.9 billion spending plan proposed by the House Finance Committee that was eventually rejected by the full House after conservatives voted against the budget with Democrats.

Wallner blasted Republicans for sneaking the provision into the budget without public input.

“These provisions never received a public hearing in either the House or Senate, in direct violation of the legislative process,” she said. “If Republican lawmakers are going to turn the budget process into a partisan debate over social issues, the least they can do is follow their own rules and be transparent about it.”

Budget writers began hammering out the details in the conference committee on Friday, with less than a week to submit a budget report by Thursday, so both legislative chambers can vote on the final version of the state budget by June 22. The current fiscal year will end on June 30.

The move to include the abortion provision signals that House GOP leadership is looking to work with conservative members, instead of Democrats, to get a budget passed. Several Democrats in the House have reportedly called the provision a “deal breaker” and if it’s included in the final version, they will vote against it.

The Senate, since it’s a smaller body of 24 members, is not as politically divided as the 400 legislators in the House. The House has several different caucuses, all wanting something different out of the state budget.

In April, the House failed to pass its version of a budget for the first time since records were kept in 1969. Members of the conservative House Freedom Caucus sided with Democrats to defeat the plan crafted by House GOP leadership citing that spending was too high and there weren’t enough tax cuts.

The Senate version included cuts to the state’s business profits tax and business enterprise tax. House Speaker Shawn Jasper took to Twitter to indicate his support for these cuts.

I support biz tax relief for NH job creators. I urge House colleagues to support our budget that will contain responsible cuts. #NHPolitics

— Speaker Shawn Jasper (@NHSpeaker) June 12, 2017

But the House Freedom Caucus and one of its members, Rep. Victoria Sullivan, R-Manchester, asked if those were the only tax cuts planning to be included in the final version.

Looking forward to more information. Are biz tax cuts the only cuts?

— Victoria Sullivan (@VSullivan4NH) June 12, 2017

With more, or other, tax cuts in the state budget, conservatives could be more inclined to support the GOP-led spending plan. Yet, if the abortion provision and no tax cuts are included in the final version before the House next week, there might not be a budget passed before the end of the fiscal year, which means lawmakers would need to pass a continuing resolution to fund the state government at its current levels and then come back to negotiate a budget again in the fall.

A lot could still happen in the final negotiation days.

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The Senate Finance Committee finished crafting its version of the state budget on Wednesday. It largely resembles what Gov. Chris Sununu proposed in February, except for new business tax cuts and a multimillion dollar investment in mental health services.

The committee voted 4-2 along party lines to approve a two-year, $11.8 billion state budget. Republicans believe the spending is conservative enough and tackles important issues facing the state, such as the mental health crisis. Democrats argue the budget doesn’t focus enough on higher education, public health, and workforce training initiatives.

“It’s a solid budget that provides what New Hampshire needs,” said Senate President Chuck Morse. “We certainly have had lists of things that we couldn’t fund, like increased funding for the university system, that we just can’t get to in this budget if we’re going to live within our means.”

One of the biggest differences between Sununu’s proposal and the Senate Finance Committee’s spending plan is the cut in the state’s business profits tax (BPT) and business enterprise tax (BET). Sununu’s budget didn’t include them.

Under the measure, the BPT would drop to 7.7 percent in 2019 and 7.5 in 2021. Meanwhile, the state’s BET would fall to 0.6 percent in 2019 and 0.5 percent in 2021.

“The budget passed by the Senate Finance Committee does not increase or create any new taxes or fees and relies on realistic revenue projections,” said Senate Finance Chair Gary Daniels. “The budget also addresses our state’s top priorities including providing resources for those most in need. This budget also includes additional business tax cuts and increases small businesses’ ability to make capital investments. This allows businesses in New Hampshire to create good paying jobs and grow their business, keeping our state competitive with other states in New England and nationally.”

The two Democrats on the committee, Dan Feltes of Concord and Lou D’Allesandro of Manchester, voted against the budget, saying several necessary programs are underfunded.

“This budget fails to fully fund full-day kindergarten, fails to fully fund our efforts to combat the opioid epidemic, and fails to adequately meet the needs of those suffering from mental illness,” D’Allesandro said. “Make no mistake, this is not the budget I wanted and I will continue to work to ensure that the critical needs of the people of New Hampshire are met.”

The Senate Finance Committee’s budget leaves out money for full-day kindergarten, which Sununu included in his proposal. Those funds, though, are part of a separate bill making its way through the Legislature.

The budget also calls for more than $17 million in spending to increase the number of mental health beds and expand mental health services. That measure was not in Sununu’s budget, but he supports it. It also increases funding for additional social workers and supervisors in the Division for Children, Youth and Families (DCYF). The Alcohol Fund is seeing an allocation of 3.4 percent of revenues, which is up from 1.7 percent in the current budget.

“We addressed our state’s most critical needs, including programs to benefit families with a disabled child and adding 60 new beds and community treatment options to relieve the growing mental health problem,” Daniels said. “We also doubled the Governor’s Commission on Alcohol and Substance Abuse Prevention, Treatment and Recovery to bring new resources into our communities combating the heroin crisis. We also made sweeping changes to the leadership at the Division of Children, Youth and Families and added more caseworkers to ensure our kids’ best interests are being taken care of and they are protected abuse and neglect harm.”

The Senate Finance Committee budget also approves the use of $2 million in unspent money from the 2017 Alcohol Fund for renovations and construction of a youth substance abuse treatment wing at the Sununu Youth Services Center in Manchester. An allocation of $250,000 per year for sexual and domestic violence prevention programs was also approved, along with $1 million in funding for 13 rape and domestic violence crisis centers operated by the N.H. Coalition Against Domestic and Sexual Violence.

Despite these additions, Feltes said the Senate GOP budget doesn’t reflect the needs of Granite Staters.

“This budget fails to include job training programs that would boost our workforce and close our skills gap, breaks promises made to our retirees and increases health care costs for our seniors,” he said. “It fails to live up to our obligations to Granite Staters living with disabilities by failing to fund our developmental disability waitlist and does not adequately deal with childhood mental health. And it fails to provide resources to reform DCYF and protect our most vulnerable children. Quite simply, this budget fails to adequately address the critical and time-sensitive challenges facing our state.”

The budget go the Senate floor for a vote. Usually, after the full Senate approves of its budget, the Senate and House confer to iron out differences between the two budgets. However, the House was unable to pass a budget this year. After the Senate approves of the budget, it will ultimately need to be approved by the full House.

The real test of the budget will be in the lower chamber, after conservative members sided with Democrats to sink the House GOP leadership’s plan last month. They cited an increase in spending and lack of tax cuts as reasons for opposing the budget. With BPT and BET tax cuts, it’s possible they might support the Senate’s plan, which included several provisions from the House budget.

If the state budget makes it through the House, it will head to the governor’s desk for his signature. The whole process needs to be done by the end of the fiscal year on June 30.

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Earlier this month, Democrat Steve Marchand announced he would run for governor in 2018. It’s only three months into Republican Gov. Chris Sununu’s term, which is why Marchand’s announcement was surprising.

Marchand is a Manchester-native and is a first generation Granite Stater. His parents immigrated from Quebec. He was a small business owner, the former mayor of Portsmouth, and director of corporate relations for the University of New Hampshire. He came in second in the Democratic gubernatorial primary in September 2016.

Marchand has been laying the ground work for his gubernatorial campaign for the past few months, meeting with various Democratic groups and committees. He’s already being attacked by the Republican Governors Association for his position on taxes and single-payer healthcare.

NH Journal spoke with Marchand shortly after his announcement to discuss his campaign, what he learned from his previous run, and what voters can expect to see in the coming months. Some responses were lightly edited for length.

NH Journal: Tell me again why you decided to run, and why did you announce so early?

Steve Marchand: The reason I’m running really stems off of my experience last year. We live in a very challenging time in New Hampshire. I believe we need a mission statement that drives…our efforts and resources towards achieving a specific mission and that mission is to be the best state in America to start a family and to start a business. The reason I say that is because I think our two biggest challenges at stake if we are to thrive in the next [few] years is we need to get younger and we need to get more entrepreneurial and nimble as an economy. I don’t believe, with all due respect to our current governor, that there is a specific mission to what he’s trying to achieve, and I don’t believe the policies that he pursued up to this point would move us toward a more younger and entrepreneurial economy. I want to get us in the right direction. If you look at the lack of organization, the lack of focus, and the lack of success early on in 2017, it is a direct reflection of a lack of specific vision, purpose, and mission in Gov. Sununu.

NH Journal: But why did you announce so early? It’s only been three months into Gov. Sununu’s term.

Marchand: It is a little bit earlier than usual, but these are unusual times. A lot of that is driven at the national level with President [Donald] Trump who is already doing rallies for 2020. Gov. Sununu was doing fundraising in Washington for his 2018 campaign. Because we live in these unusual times…it means that if you want to move in the right direction, you don’t have the luxury of waiting while others move forward, no matter how early on the calendar it happens.

NH Journal: You came in second in the Democratic primary after jumping into the race late in the game. Besides announcing early, what is going to be different about this campaign?

Marchand: I got in awfully late last year. It was not a strategy. It was just the way life foregoes. A number of people approached me in March of last year suggesting I would make a very good candidate because they know my background. I had very little money, very little time. I spent about $100,000 total. I got outspent 18 to 1 by the person who beat me [former Democratic gubernatorial nominee Colin Van Ostern]. With very little time and no TV ads or direct mail, it really was the definition of a grassroots effort. So I believe that the message, which is a data-driven message, focused on the mission as I mentioned earlier, resonates not just with Democrats, but across the political spectrum. So starting early allows to me invest more time on the ground. It will make me a better governor. I will continue to learn from people as I campaign. It also means I start with a base of significant support and name identification that simply was not there a year ago when I started.

Photo Credit: Steve Marchand for New Hampshire Facebook page

NH Journal: You ran as a progressive, but fiscally responsible candidate last time. Is that still you? Are there any changes in your platform from before?

Marchand: My value set and my view of the priorities will look very familiar to people who followed my candidacy in 2016. There are some places where there has been a refinement or continued development of knowledge. I am a proud progressive and I’ve got a proud record of fiscal responsibility, and I’m always looking for ways to move ideas and turn them into law.

NH Journal: Gov. Sununu has made encouraging new businesses to come and stay in the state a priority. How would you plan on doing that?

Marchand: I’ve known Gov. Sununu for a long time and he’s a good guy, so it’s obviously nothing personal. However,…the policies he has pursued to grow the economy, largely run 180 degrees from what the data tell us we should be doing if we actually want to create jobs and see economic growth. For example, Chris and the Republican legislature want to cut the Business Profits Tax. Anybody who has spent anytime with entrepreneurs or being an entrepreneur will tell you that most new businesses don’t make a profit in the first five years. They lose money at the beginning. It’s really hard to start a business and see it to the point where it becomes a profitable entity. When we cut the Business Profits Tax, we accelerate what has been going on in the state for 50 years under both Democratic and Republican administrations and that is the downshifting of responsibilities and cost from the state level to the town and local level. If you focus on local property taxes and cutting the Business Enterprise Tax, you will be directly and positively impacting the segment of economy where 80 percent of net new job growth comes to fruition. I think that Chris is focused on talking points when he focuses on the Business Profits Tax, but we need to focus on the data. And the data tells me that focusing on the Business Enterprise Tax and on reducing local property taxes is the winning formula for tax reform that will lead to job creation and economic growth.

NH Journal: You say that it’s crucial to have young people in New Hampshire to become the best state in America. How do you plan to encourage them to stay in the state?

Marchand: I think of dealing with the younger population as a two-part challenge. I don’t think the current governor thinks of it this way. I don’t think our legislature thinks of it this way. I call them [young people] the numerator and denominator problem. The denominator problem is how can we attract young people to come work and live in the state. The problem with that is when you have an ever shrinking number of young kids in the state, you can’t keep 100 percent of them, even if you made college free for everyone. We have to be the most inclusive state that we can be as it relates to immigration. The states that are getting the youngest are seeing the largest influx of immigrants. Some of the rhetoric that has come from President Trump, Gov. Sununu, and members from the Republican legislature make it more difficult for immigrants to see New Hampshire as a great place to come. That’s a shame. If we’re going to get younger and more entrepreneurial, aggressively pursuing pro-immigration policies is going to be an important part of solving our denominator problem because the numerator problem is how can we keep more kids that are already here in the state. The pilot program between higher education and New Hampshire businesses I would pursue that would cost approximately $5 million a year in three programs: computer science, nursing, and education because those are three places where we don’t have enough talent to match the demands. It would create a debt-free college experience for students that enter the program…to work with New Hampshire-based companies or entities. And if they did that, kept their nose clean, kept their grades up, and then worked for one of those New Hampshire-based employers for a period of years after graduation, they would have no debt. It would be half-paid by the private sector participants and half-paid by the targeted state grant for these programs.

NH Journal: You have previously discussed legalizing and taxing marijuana, and increasing the gas tax as ways to increase revenue for the state. Are those positions you still support?

Marchand: Those are areas I continue to discuss. I do favor the legalization, regulation, and taxation of marijuana. I do feel it would have a net positive impact in terms of lowering costs for law enforcement and judicial [entities]. I also think that it will improve health outcomes and reduce addiction rates, and it will generate revenue. The gas tax is…not desirable. That’s definitely a flaw, but I believe when you can attach the revenue stream to the use of the revenue stream, that’s a more transparent system and because infrastructure is a priority. The business leaders I’ve talked to over the years also identified it as a priority. For now, the gas tax is one of the most direct tools in the toolbox. It is something I still have on the table because I think [infrastructure] is one of the biggest barriers we face to economic growth if we do not address and updated electric grid, ensured drinking water, improved Internet access particularly in rural areas, and improving our roads and bridges. Conservative business people tell me ‘why would I invest in New Hampshire, if New Hampshire doesn’t invest in New Hampshire,’ and they meant these infrastructure issues.

NH Journal: What about sales tax and income tax? You were against those previously. Are you still against them?

Marchand: That is correct.

Photo Credit: Steve Marchand For New Hampshire Facebook page

NH Journal: One of the most important issues still facing the state today is the opioid crisis. What do you think still needs to be done to tackle this problem?

Marchand: This is one area in New Hampshire where we have seen bipartisan efforts. I applaud people on both sides of the aisle. Over the last few years, I think they have taken this issue with the level of gravity that is required and I believe there are many more opportunities in the next several years to continue that bipartisan spirit. It doesn’t mean we’re anywhere near where we need to end up, but we have everyone rowing in the same direction about the situation. We need to continue to provide the resources that continue to give a suite of services to those in the midst of recovery, beyond simply detoxification of the addictive substance. Until recently, I think a lot of people in the world of politics saw recovery as largely detoxification. The reality is that if we simply just detoxify people and then we put folks back in a situation where addiction became the norm, the likelihood of relapsing is really high. We need to work together and it requires a level of collaboration that is not inexpensive. But it’s a hell of a lot less expensive than not doing it. That needs to be our attitude. I priced it out last year in that it would be an additional $8 to 10 million a year of resources that would provide a level of stability for local and regional recovery centers to focus less on having to worry about where the next grant will come from in order to stay open. It would allow these people who are doing amazing work in the field of recovery to be able to focus on their gifts and skills to help people. I think it’s a relatively low amount of money…that would improve lives, reduce costs, and directly address what New Hampshireites say is the most important issue facing us.

NH Journal: What do you think needs to happen next year in order for the Democratic Party to gain seats back in the Legislature?

Marchand: Once every four years, the country reorganizes what it means to be a Republican and Democrat. We are in the midst of the next resorting of how people look at what it means to be a Democrat and a Republican. We are not close to the end of that process. We are right in the middle of it. Donald Trump and Bernie Sanders understood better than most the level of economic anxiety that millions of Americans across party lines are feeling. There are a lot of people who are really angry and I get it. I believe that in 2018 and beyond, and it’s part of why I am passionate about this marathon that I’ve begun as a candidate, is to rebuild the future coalition that I believe can be a Democratic majority is one that is passionate about civil liberties, that is passionate about entrepreneurship as the centerpiece to economic growth, that understands that if you think about the economy right way, you can lower income inequality, which right now is splitting our country up in highly destructive ways. We need people that have spent time professionally, politically, and in their personal lives understanding these aspects of it and are unafraid and confident to use that data, experience, and information to lead that way forward. That’s part of what excites me about this marathon that I’ve begun is I feel I have a good idea about where we need to go as a state and want to help us get there.

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