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Trying to create ways to even the tax burden

New Hampshire Union Leader

January 24. 2015 8:21PM

CONCORD - New Hampshire doesn't have the tax revenues needed to meet critical needs and should take a new look at its approach to developing the state budget.

That was the theme at the Building a Better Budget Conference, hosted by the New Hampshire Fiscal Policy Institute on Friday.

Rather than cutting business taxes, one speaker said the state should take steps to make sure all businesses are paying their fair share.

A spokesman for the Business and Industry Association, in a separate interview, said the state's business taxes are already among the highest in the nation and should be cut to foster greater economic development.

The Republican-led state Legislature is considering bills that would reduce the Business Profits Tax and the Business Enterprise Tax, which is essentially a payroll tax - two of the state's main revenue sources.

Meanwhile, a costly legal settlement over the state's mental health services, calls to reduce tuition at the state's colleges and universities, and deteriorating roads and bridges are straining the expense side of the ledger.

Against that backdrop, the Fiscal Policy Institute welcomed nearly 150 attendees to the Grappone Conference Center, including state representatives, municipal officials and social service agency employees, for a budget conference with the theme, "Meeting today's needs, preparing for tomorrow."

Founded in 2009, the NHFPI describes itself as an agency that lobbies in the interest of lower- and middle-class citizens, while its conservative critics consider it a liberal public policy group lobbying for a broad-based tax.

NHFPI Executive Director Jeff McLynch testified before the New Hampshire Senate Ways and Means Committee on Jan. 20 in opposition to the proposed reductions in the BET or BPT.

Reliance on residential

At Friday's event, Dan Bucks, revenue director for the state of Montana from 2005-13, and now a consultant on state tax policy, pointed out that residential property comprises more than 75 percent of New Hampshire's property tax base. He recommended a study to determine if commercial property is undervalued as compared to residential property in the state.

He also recommended an analysis of how many businesses pay the full 0.75 percent of payroll or the 8.5 percent of profits, as the state's tax code requires, or use tax havens and loopholes to lower fiscal liability.

"A bunch probably pay close to the 8.5 or 8 percent," he said. "A bunch in the middle pay a little less, but a surprisingly large number of corporations that are profitable pay little or no business profits tax."

The current proposal before the Legislature would cut the BET to 0.65 percent and the BPT to 8 percent over two budget cycles, or four years.

"There's no question New Hampshire has a high business profits tax, which is something businesses are well aware of and leads to not being competitive," said Adrienne Rupp, senior vice president for communications at the statewide Business and Industry Association.

"If you lower the rates of these taxes, you are going to encourage more businesses to come to New Hampshire, to expand in New Hampshire, and lead to increased tax revenue," she said.

Bucks railed against the notion that cutting taxes eventually raises tax revenue, and said the argument has never been supported by economic analysis or by recent history. Prosperity was strong between 1945 and 1979, he said, when taxes were higher and wealth less concentrated.

"We are growing slower today in a time when tax-cutting was supposed to make us grow faster," he said.

He urged the state to consider a budget approach in which vital needs are identified and then funded in a sustainable way. "That was in vogue for 40 years of prosperity," he said.

Backwards approach

Greg Moore, state director of the New Hampshire chapter of Americans for Prosperity, called that a backwards budgeting approach and said it would only lead to bigger government.

"That is an approach that is absolutely antithetical to what families and businesses are doing across the state," he said. "In a real world environment, where people are being responsible with their money, what they do is figure out how much money they have to spend and then determine where they are allowed to spend it."

"The responsible way to budget," he said, "is to find a way to figure out what taxation people can afford and then limit the budget and take responsibilities away from the government that aren't needed."

The Friday event opened with presentations on the impact of a $30 million settlement the state must pay to settle a class action lawsuit over poor mental health services.

Former Commissioner of Transportation Christopher Clement described the deep deficit in the state's highway fund, which persists despite a recent increase in the gasoline tax, while Kristyn Van Ostern, associate chancellor and chief financial officer at the Community College System, discussed the impact of New Hampshire's high in-state tuition rates and student debt burden.

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