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New Tax Cut Estimates Push Senate Budget Out of Balance

A new analysis from the Department of Revenue Administration (DRA) finds that the business tax cuts included in the version of the FY 2016-2017 budget that the Senate will consider today would result in a more sizable and more rapid loss of revenue than previously anticipated. The analysis also suggests that the lion’s share of the tax reduction would accrue to a relatively small number of corporations operating in New Hampshire.

The version of the budget approved by the Senate Finance Committee last week would reduce the rate of the business profits tax (BPT) from 8.5 percent to 7.9 percent by the end of 2019 and drop the rate of the business enterprise tax (BET) from 0.75 percent to 0.675 percent over the same span. Members of the Committee assumed that these phased-in reductions would not have any impact on state revenue collections in FY 2016, but would lower such collections by $14 million in FY 2017. However, in a letter to Governor Maggie Hassan on June 2, DRA Commissioner John Beardmore notes that, given the proposed effective dates for the rate reductions, there would, in fact, be an impact in FY 2016 – a loss of $3.8 million. This effect, as Commissioner Beardmore observes, “is the result of adjustments that are likely to occur with the first two business tax estimate payments for Tax Year 2016, which are due in FY16.” In the same letter, he estimates a FY17 revenue loss of $19.4 million arising from the reductions to the BPT and BET. In other words, with these latest estimates, the Senate Finance Committee’s version of the budget, in order to maintain balance and still reduce business tax rates, must either reduce spending by an additional $9 million over the course of FY 2016-2017 or carry forward another $9 million in surplus from FY15 into the next biennium, over and above the $34 million surplus on which it already relies.

Finally, data accompanying the Commissioner’s letter indicate that there were fewer than 700 business entities with either a BPT or a BET liability in excess of $1 million in tax year 2012. These entities, in turn, represent approximately 1 percent of all businesses filing tax returns that year. DRA estimates that roughly $13.8 million of the $23.1 million tax cut the Finance Committee’s budget would produce in FY2016-2017 would accrue to these very large taxpayers. In other words, these very large businesses would receive close to three out of every five dollars flowing out of the budget in tax cuts over the next two years.

 

 

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Lackluster September State Revenues Reduce Surplus

4 Oct 2017

tree with coins

September was the first big month for revenue collection of State fiscal year (SFY) 2018, and while the total cash collected should not yet ring alarm bells, overall receipts were nothing to boast about. This trend continues observations from SFY 2017, which ended June 30, 2017, and the first two months of the current fiscal year. The General and Education Trust Funds, the primary repositories for the least restricted revenue streams from State taxation, were $2.3 million (0.5 percent) above plan for the year after September’s receipts, but that was down from $4.6 million at the end of August, with September’s shortfall relative to the revenue plan cutting the unrestricted cash revenue surplus in half.