First published in New Hampshire Business Review, October 20, 2023

Monthly tax revenues collected by the State of New Hampshire can provide insight into key aspects of the economy. The state has generated significant revenue surpluses in recent years, as receipts have outpaced budget expectations set by the Legislature, particularly during the relatively fast recovery from the COVID-19 pandemic.

The first three months of revenues to support the new state budget, including the important quarterly business profits tax and business enterprise tax estimate payments, can offer indications of both the economy’s health and the state’s fiscal status.

The economic picture is generally positive, but with key points of caution.

Between July 1 and September 30, the first quarter of the new fiscal year, meals and rentals tax revenues, generated primarily by restaurant meals sold and hotel rooms rented in the state, were about 2.6% above the prior year and 0.6% below the state budget’s revenue plan.

Inflation faced by New England consumers during the year ending in August 2023 was 2.3%, suggesting little real economic growth in this sector.

Real estate transfer tax revenues were 21.6% lower than the first quarter of last fiscal year.

This drop reflects both a smaller number of transactions, due to lack of inventory, and the slowing of purchase price growth due to higher interest rates limiting the ability of most buyers to afford higher monthly payments.

Tobacco tax revenues are down 16.4%, likely due in part to a long-term trend of less cigarette smoking.

Taxed gasoline and other fuel consumption was only 0.24% higher thus far this year.

Pushing revenues up, combined business tax receipts were 10.3% ahead of last year, which may reflect a combination of strong national corporate profits at large entities and higher wages in New Hampshire’s tight labor market.

Interest and dividends tax revenues, which are collected from income generated by significant wealth and likely reflect stock market behavior, were 18.5% higher.

Total state general and education trust funds revenue was 5.7% above last year’s revenues through September, and 6.0%, or $36.4 million, above the state’s revenue plan.

Surplus revenue means additional dollars may be available to use in the next legislative session.

The existence of a surplus, however, only indicates there is revenue above the state budget’s planned dollar amounts.

Legislators writing this state budget projected revenues would grow very little after tax reductions, suggesting that surpluses may appear but will not necessarily represent significant new economic growth beyond inflation.

Phil Sletten is research director for the NH Fiscal Policy Institute. The NHFPI Policy Memo is a partnership of the NH Fiscal Policy Institute and NH Business Review.