Brittle tax base: danger ahead
New Hampshire has always valued careful budgeting and responsible financial planning. But today, our tax structure is more fragile than many realize. According to the nonpartisan New Hampshire Fiscal Policy Institute, just 5% of business-tax filers generate nearly 80% of all business tax revenue. That means our state budget depends heavily on a very small group of companies. Even a modest economic downturn — a bad quarter, a merger a relocation — could create a sudden and severe revenue shortfall.
When revenues decline, a narrow tax base accelerates the damage. The rainy day fund depletes faster, deeper budget cuts become unavoidable and the burden shifts to municipalities. That shift appears locally as higher property taxes and reduced services during the next recession.
Over the years, changes to our tax system — including repeated reductions in business tax rates and the elimination of the Interest and Dividends Tax — have further narrowed an already narrow base. As a result, New Hampshire has become an outlier even among red states. Only Alaska has a less broad revenue structure, and Alaska stabilizes its budget with oil revenues — something New Hampshire does not have.
Fiscal responsibility means acknowledging these structural weaknesses before the next downturn. It means building a revenue system that can withstand economic cycles without pushing more costs onto homeowners or forcing cuts to essential local services.
With many economists warning that a recession may be on the horizon, maintaining — not cutting — tax revenues is prudent financial management and responsible stewardship of New Hampshire’s future.