In the latest episode of New Hampshire Uncharted, host Gene Martin sits down with New Hampshire Department of Revenue Administration Commissioner Lindsey Stepp and NHFPI Research Director Phil Sletten to explore why the state’s revenue outlook is dimming—and what it could mean for the upcoming budget.
“I’ve been involved with revenue estimating at DRA since roughly 2010 in various roles, and I think that this is one of the hardest times that I’ve experienced in terms of estimating revenue for this upcoming biennium,” explained Stepp on the podcast.
After years of surpluses, business tax revenues are falling, the Interest and Dividends Tax has been repealed, and policymakers are left with tough questions about how New Hampshire raises—and spends—its money.
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How We Got Here
State business taxes saw years of double-digit growth after the pandemic, but that trend is shifting. “Businesses are likely resetting their payments to the state,” said Stepp. Many had overpaid during the higher profits collected during the COVID-19 pandemic and are now scaling back based on uncertainty in the current financial outlook and the potential need for more cash on hand.
Even with the slowdown, revenues remain strong by historical standards—Stepp estimates the state will still collect around $1.1 billion in business taxes this year, up about $200 million from pre-pandemic levels.
The Long-Term Cost of Tax Cuts
Sletten noted that business tax rate reductions from 2016 to 2024 may have cost the state between $800 million and $1.2 billion. In 2024 alone, “those tax rate reductions likely led to between $160 million and $235 million less in state revenue.” Combine that with the recent repeal of the Interest and Dividends Tax, and the state could be forgoing approximately $350 million next year due to those policy changes.
“Our revenue growth from business taxes, or from corporate taxes as they’re often referred to in other states, was not unique,” explained Sletten. He noted that NHFPI “didn’t find any academic or peer-reviewed research that said lowering corporate tax rates leads to more revenue.”
Who Pays Business Taxes?
Most New Hampshire business tax revenue doesn’t come from small businesses. “About 5% of filers pay about 80% of the Business Enterprise and Business Profits Tax,” Martin explained. That means national corporate trends, rather than small business activities in New Hampshire, have an outsized impact on the state’s budget stability.
What to Watch
As lawmakers build the next state budget, uncertainty looms. “This is one of the hardest times that I’ve experienced in terms of estimating revenue,” said Stepp. Many tax payments are based on incomplete data, and economic conditions remain in flux.
“There’s no little love note on [an estimated payment] that tells me why their estimate might be more or less than they paid last year,” said Stepp.
Sletten is watching how business tax estimates line up with final returns: “Corporate profits could go in a lot of different directions over this next year or two… and that first quarter estimate is, at least ideally, what businesses might be telling us they think those profits are going to be.”
