Capital Beat: What is, and isn’t, a ‘tax increase’ in the state budget?
Does it count as a tax increase if taxes are prevented from going down?
It depends who you ask. And depending on the answer, the latest version of the state budget for the next two years either raises taxes on New Hampshire businesses, or it doesn’t.
Back in 2011 and 2012, the Republican-dominated Legislature made a number of cuts to business taxes. But some of the changes didn’t go into effect immediately, so their effect on revenue wouldn’t be felt until the next state budget – the one being hammered out now by a Democratic-led House, a Republican-led Senate and a new Democratic governor.
There are three key tax reforms in play:
∎ An increase in the amount of annual net operating loss that a business can carry forward as a deduction against the state’s Business Profits Tax, from $1 million to $10 million,
∎ An extension of the time a business can carry forward its Business Enterprise Tax payments as a credit against the Business Profits Tax, from five years to 10 years, and,
∎ An increase in the threshold for determining if a business must pay the Business Enterprise Tax, from $150,000 to $200,000, and indexing future changes in the threshold to inflation.
In the budget she unveiled in February, Gov. Maggie Hassan proposed delaying the changes until 2015, with the exception of the increase in the net operating loss carryover, which would be delayed until 2014, the second year of the next biennium. That was estimated to save the state $17 million over two years.
“In the last biennium, the Legislature also made a number of promises for tax law changes, but pushed off to the next Legislature the job of paying for them. Our uncertain fiscal times mean we must further delay some of those changes,” Hassan said in her Feb. 14 budget address.
The House, with its Democratic majority, agreed with the governor. But the Senate Republicans could be a different story.
“In conversations that I’ve had with several senators, they’ve made abundantly clear that they have no interest in not allowing those tax law changes made by the prior Legislature (to go) into
effect,” said Greg Moore, state director for Americans for Prosperity.
The budget pudding won’t set until late June. But say, in the end, the tax-law changes were suspended: Would that mean the state budget raises taxes on business?
Moore says yes.
He noted that, under current law, all three changes will apply to the current tax year. (The expansion of the net operating loss carryover took effect Jan. 1, and the other two take effect later this year.) Businesses might be counting on those tax cuts when they make decisions now about hiring or expansion, he said.
“Even though you might not technically pay your taxes until later, the reality is, from a planning perspective, you’re suddenly having the rug pulled out from under you,” Moore said.
The chairwoman of the House’s tax-writing Ways and Means Committee disagrees.
“That’s certainly not a tax hike. It’s a delay of a tax cut,” said Rep. Susan Almy, a Lebanon Democrat. “And whether we should be cutting them at all, when we still haven’t recovered to the same level of revenues as we had before the recession started . . . is a major question.”
Jeff McLynch, executive director of the New Hampshire Fiscal Policy Institute, said it’s tough to argue delaying the threshold increase or the BET credit carryforward extension constitute a tax increase. The net operating loss change, on the other hand, has already taken effect, he noted.
Still, McLynch said, “I don’t think it’s fair to say that they’re all tax increases. These are suspensions – and they’re not even repeals, to be more clear. They’re simply suspensions.”
Senate as stage
The Senate Finance Committee got punk’d Thursday night.
The committee’s public hearing on the state budget was already past the four-hour mark (en route to a final running time of six hours) when a man who had put his name down as Edgar Friendly was called to testify.
He spoke and then shouted for a couple minutes about democracy being a “dying giant” and wanting to be able to choose his own food at a greasy spoon diner. Eventually, Sen. Chuck Morse told him to get lost.
“You’re done, okay? You’ve had your two minutes,” said Morse, a Salem Republican and the panel’s chairman. The man continued to yell for a bit, then stormed out of Representatives Hall.
Here’s what we know: Part of the man’s rant came from the 1976 film Network, and another portion was verbatim from the 1993 classic Demolition Man. (Edgar Friendly is the name of Denis Leary’s character in the latter movie.)
“Friendly” was being filmed during his testimony by Garret Ean, a former Republican House candidate and blogger at FreeConcord.org. Ean said the man was a performance artist – in fact, the second of two who spoke at the hearing.
‘My little shrine’
Speaking of things said in Representatives Hall last week: Rep. Jeanine Notter raised some eyebrows when, during a House debate, she spoke about her love of Civil War history.
The Merrimack Republican described her library of history books and Civil War-themed cross-stitches she’s made.
“And then there’s my little shrine to Robert E. Lee,” she said.
The mocking began almost immediately. Zandra Rice Hawkins of Granite State Progress, the liberal advocacy group, called it “odd, particularly given the fact that New Hampshire fought on the other side of the war.”
Notter didn’t shed light on what, exactly, is in that shrine. But she says her words are being twisted to obscure her point: The bill that was on the floor, which would send revenue from a commemorative liquor bottle into a fund for preserving historical flags, could have instead created revenue for Hassan to raid in order to balance the budget.
(The House voted last month to give Hassan authority to raid dedicated state funds to close any deficit for the current fiscal year. That option seems less likely now that strong revenues in March and April have brought the state’s revenues into the black.)
“I cited my interest in history to explain my concerns with legislation that would fund the preservation of New Hampshire’s historic artifacts. Gov. Hassan is trying to gain full authority to raid dedicated funds and inappropriately use money that has been set aside for programs like this for other purposes,” Notter wrote in an email. “The Democrats are trying to twist my words to distract from the bipartisan opposition that has been generated by Gov. Hassan’s outrageous power grab.”
Rep. Bill O’Brien hasn’t been speaker of the House for five months now, but the New Hampshire Democratic Party is still using the Mont Vernon Republican as a political piñata.
In news release after news release over the last couple months, the state party has basted the “O’Brien-Bradley Legislature” or the “O’Brien-Bradley Budget” of the previous two years.
Of course, Senate Majority Leader Jeb Bradley, a Wolfeboro Republican, wasn’t technically in charge of the Senate in 2011 and 2012. That distinction belongs to Senate President Peter Bragdon of Milford.
“He was,” acknowledged Democratic Party spokesman Harrell Kirstein. “But Bradley is the majority leader.”
Of course, Bragdon hasn’t given any sign he might seek higher office in 2014, while O’Brien is exploring a run for Congress and Bradley has been mentioned as a possible candidate for the U.S. Senate.
Kirstein declined to comment on such motivations for the party’s choice of words.
Ayotte’s air war
U.S. Sen. Kelly Ayotte is getting backup in the political fight over her vote last month against expanding background checks.
The New Hampshire Republican has been taking heat from gun-control advocates since the April 17 vote. Mayors Against Illegal Guns, the gun-control group cofounded by New York Mayor Mike Bloomberg and Boston Mayor Thomas Menino, last week announced it would run a television ad against Ayotte in the Manchester and Boston markets; spokeswoman Kayla Keller described it as a six-figure buy but didn’t give a specific number.
But Ayotte’s supporters are going on the air, too. A conservative group, the American Future Fund, is putting an ad on the air in Manchester and Boston praising Ayotte; the online and television ad buy is around $250,000, according to Politico.
The ad features law-enforcement personnel and two women, each identified as a “New Hampshire Mom,” thanking Ayotte for her vote.
“When it comes to preventing gun violence, Kelly voted for what works: fixing background checks and strengthening mental-health screenings,” says Christopher Connelly, a former Dunbarton police chief, in the video.
The state Democratic Party cried foul and pointed out that one of the moms, Jayne Millerick, is also a former chairwoman of the state Republican Party.
New Hampshire’s congressional delegation had a productive week.
Ayotte and Democratic Sen. Jeanne Shaheen went to the White House Thursday for a meeting on the problem of sexual assaults in the U.S. military. Both women sit on the Senate Armed Services Committee, and Ayotte sponsored related legislation last week with Democratic Sen. Patty Murray of Washington State, the Combating Military Sexual Assault Act of 2013.
Earlier in the week, the Shaheen-sponsored Energy Savings and Industrial Competitiveness Act passed out of the Senate Energy and Natural Resources Committee on a 19-3 vote. It next heads to the Senate floor.
On the House side, 2nd District Rep. Annie Kuster introduced a bill that would force federal agencies to close many of their bank accounts that contain no money but cost monthly service fees. The Washington Post reported last month that the federal government had 13,712 bank accounts with a balance of zero that could cost at least $890,000 this year.
And the House voted 398-2 to pass the Vietnam Veterans Donor Acknowledgment Act of 2013, which allows donors to the Vietnam Veterans Memorial Visitor Center to be recognized on a display panel at the center in Washington, D.C. 1st District Rep. Carol Shea-Porter was a cosponsor of the legislation, which now heads to the Senate.
Specials on tap
A couple of House special elections are coming up.
A special election is scheduled June 4 in Claremont’s Ward 2 to replace Democrat Thomas Donovan, who resigned his seat in February. Republican Joe Osgood will face Democrat Larry Converse.
In Manchester’s Ward 7, voters will pick a replacement for Democrat Patrick Garrity, who resigned his seat in March. A primary is scheduled Sept. 17, with a general election to follow Nov. 5.
(If only one Democrat and one Republican file to run in the race, the primary will become the general.)
There’s a third vacant seat in the House, representing Nashua’s Ward 8. Democrat Roland LaPlante resigned in February, but the city hasn’t yet requested a special election. Nashua City Clerk Paul Bergeron said he expects that special election will coincide with this fall’s municipal election.
The balance of power in the House now stands at 218 Democrats and 179 Republicans.
∎ Judd Gregg, the Republican former governor and U.S. senator, is in the running to become president and chief executive officer of Wall Street’s biggest lobbying firm, the Securities Industry and Financial Markets Association.
That’s according to Bloomberg, which cited four anonymous sources.
∎ The New Hampshire Democratic Party will hold its mid-term convention June 1 at Nashua High School South in Nashua.
∎ Can’t get enough Capital Beat? I’m now blogging updates during the week at concordmonitor.com/capitalbeat.
(Ben Leubsdorf can be reached at 369-3307 or email@example.com or on Twitter @BenLeubsdorf.)