Dave Solomon's State House Dome: Business revenue boost questionedBy DAVE SOLOMON
July 15. 2017 10:59PM
I RECEIVED A LOT OF FEEDBACK on last week's column regarding the impact of lower business taxes on state revenue, some of it worth sharing.
David Juvet, senior vice president for public policy at the Business and Industry Association, wants to make sure that New Hampshire's ranking by the Tax Foundation as 7th best tax environment for businesses is put into proper context.
"Digging deeper into that study shows that this high ranking is attributed to lack of sales tax, and a very limited income tax (only assessed on interest and dividends)," according to Juvet. "When you look at specific taxes paid by businesses, the business profits tax (often identified as "corporate income tax") and property taxes, New Hampshire does not fare as well. Even taking into account the tax reductions in the last biennium, New Hampshire ranks 46th out of 50 states for business taxes and 43rd highest for property taxes."
But it's great to be seventh overall, says Juvet, "and with the latest round of business tax reductions in the recently-passed budget, we are certainly moving in the right direction."
State Sen. Dan Feltes, D-Concord, one of the most vocal critics of the tax cuts in the Senate, noted that the 2016 revenues that are so widely touted as proving the advantages of lower business taxes were based on business activity in 2015 and some of 2014, when the tax cuts were not in effect.
"To generally say that the 'proof is in the pudding' reflects a lack of understanding of the state budget, or an intentional misleading of the public. Neither is good governance," he said. "The reality is our economy was taking off coming out of the recession, and under the leadership of then-Gov. Maggie Hassan, and now the revisionist Republican Party is trying to rewrite history."
Finally, this cautionary note from economist Brian Gottlob of Dover. While state revenues have been strong over the past two years, business tax revenue was actually slightly lower (by $2 million) in 2017 than in 2016.
Perhaps more telling, says Gottlob, is that New Hampshire has seen job losses in the first half of 2017. "We all expected labor shortages to reduce the rate of job growth but I did not expect to see job losses," he said. "Small state job numbers can be volatile month-to-month and subject to significant revisions, and I am hoping that the numbers will be revised upward."
Five months of job losses is looking like a trend and six months (with June) would qualify as a troubling trend, according to Gottlob. "There were good reasons to cut business taxes," he says, "but the legend of the stimulative effects of business tax cuts is much more myth than reality."