The budget approved by the Senate Finance Committee proposes reducing the business profits tax (BPT) from 8.5 percent to 7.9 percent by the end of 2019 and lower the business enterprise tax (BET) from 0.75 percent to 0.675 percent in the same time period.
In a letter form NH Department of Revenue Administration Commissioner John T. Beardmore to Governor Hassan, it seems that the impact to revenues may have underestimated.
The Senate Finance Committee assumed that there would be no impact in 2016, but Commissioner Beardmore disagreed. The proposed effective dates of the tax cut ( beginning July 1st 2016) would result in an additional loss of $3.8million in revenue for 2016. According to Beardmore this “...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.” The DRA also estimates that the 2017 revenue loss would now be $19.4 million, about $5 million more than the Senate estimated.
The end result is that there will be an additional shortfall of $9 million that will require additional cuts in spending to balance the budget.
In the same letter from the DRA, the vast majority of the revenue reductions would be enjoyed by a very small number of NH businesses. There were 718 businesses in NH that paid more than $1 million in BPT 2012. That represents about 1.1% of all NH business entities. In total, they paid 75.8% of the BPT. Of the $9.9 million reduction in BPT, this 1 percent of NH businesses would receive a savings of $7.5 million, or 76% of the estimated total tax cut. This undercuts to some degreee the argument that the reduction in BET and BPT will cause more small businesses to relocate or be created here in NH.