Remember all the hoopla by some politicians who were taking credit for the $100 million or so in the State's rainy day fund as due to the cuts in the Business Profits Tax (BPT) and Business Enterprise Tax? The focus was on the September revenue report ( traditionally a month when revenues spike dramatically) which indicated a larger than normal spike.
The October monthly revenue report told a different story. "Business Taxes for October totaled $17.6 million, which were $4.2 million
(19.3%) below plan and $6.8 million (27.9%) below prior year." In fact, it was the lowest October for business taxes in the past five years and was 39% lower than September 2013. ( NH Division of Accounting Services.)
A little background. The Business Profits Tax was reduced from 8.5% to 8.2% for taxable periods ending on or after December 31, 2016.
The Business Enterprise Tax a 0.75% tax was reduced to 0.72%. for taxable periods ending on or after December 31, 2016.
Both the BET and BPT are set to be reduced again contingent upon combined unrestricted general and education trust fund revenues of $4.64 billion being collected during the biennium ending June 30, 2017.
American's for Prosperity-NH also took credit for the increased revenues after the September report, but really had no evidence to back it up.
“There can no longer be any doubt that the tax relief that took effect at the start of the year has been (sic) enormous boost not only to our economy, but to the state treasury. September is one of the largest months for business tax revenues, and the fact that revenues came in 23% above plan again validates the reality that this tax relief for our employers has been an absolute plus."Greg Moore, AFP-NH .
Actually, there can be some doubt. The increase in revenue is indeed very good news, but there is a more to the story than taking credit for some things that the decrease in the tax rates had nothing to do with.
Looking at the September business tax numbers, we came off a very dry, but very profitable summer for the tourist industry. In a nutshell, business was booming. Gas prices were the lowest in a long time. Memorial Day weekend was reported to be the best in a decade, WMUR reported record numbers of visitors for the 3 day holiday weekend. Business NH after the July 4th holiday, reported record breaking tourism numbers. And on and on the summer went. People were here in huge numbers and they were spending a lot of money, so businesses were making a lot of revenue.
There are eight more months to go in the fiscal year and time will tell how revenues fare. I don't however find evidence that the reduction in the business taxes caused businesses to move or expand in NH, nor is there evidence that it caused employers to hire more workers. NH has very limited sources of revenue, and while the tax cuts were not drastic, lawmakers may now be inclined to make more significant cuts on the false assumption that it is stimulating job growth and business migration, which could create budget gaps that will be difficult if not impossible to fill.
Where we need to focus in my opinion, is giving a significant break to the single proprietor and small business owners that typically invest in their communities and have a direct impact on the local economy. That is a win-win for NH and the small business owners,
So, after a great warm and dry summer, NH had an excellent revenue stream, indicating that revenue estimates are only as accurate as the weather report. Lets hope for a great winter tourism season.