Like most states, New Hampshire is faced with yet another budget shortfall to close in the upcoming fiscal year, this one at roughly half a billion dollars. The New Hampshire House of Representatives approved a budget in March that closed the gap almost entirely through cuts in spending ($489 million total) including reductions in child-care assistance for low-income families and funding for the state’s university system. Yet, incredibly, New Hampshire lawmakers are still considering a variety of proposals to cut business taxes.
This week, the New Hampshire Fiscal Policy Institute (NHFPI) published an informative brief explaining how various proposals to reduce the state’s two main business taxes would result in millions of dollars more in spending cuts.
The brief also debunks myths that lawmakers have promoted to justify cutting business taxes. One is that the state’s business taxes are extremely high. (They are comparable to the national average.) Another is that business taxes influence business location decisions, and that lowering taxes on businesses would fuel economic growth.
NHFPI also points out that the two business taxes lawmakers are considering reducing, the Business Profits Tax (BPT) and Business Enterprise Tax (BET), make up a relatively small share of the total taxes New Hampshire businesses pay. The tax that represents the largest share, the property tax, could in fact increase as a direct result of cutting the BPT and BET.
A state tax cut of any size would likely lead to reductions in funding for local aid, which would in turn force local governments to increase property taxes to pay for local services.