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Havenstein, Hemingway share ideas for growing state’s economy



Last modified: Thursday, August 14, 2014
Walt Havenstein and Andrew Hemingway both think New Hampshire’s economy isn’t growing fast enough, and they’ll offer similar reasons when asked why: high business taxes, high cost of energy and health care, high costs of workers’ compensation.

But ask them how they’ll fix it if elected governor, and they have two very different answers. Hemingway’s plan for economic growth would eliminate most taxes in favor of a 2 percent flat tax on all employers, including local governments and nonprofits, which is a radical restructuring of the state’s tax code. The only tax change Havenstein proposes, in contrast, is dropping the business profits tax by 1.1 percent over two years, and that’s part of a broader plan to create 25,000 jobs by August 2017.

Voters will choose which candidate – and which ideas – they like better in the Sept. 9 Republican primary. The winner will take on Gov. Maggie Hassan, a Democrat.

Havenstein outlined his “8.15.17” proposal (the name marks the date for when he wants to hit his jobs goal) during a visit yesterday to Herrick Tech Labs in Manchester. Havenstein’s plan offers an overarching job creation proposal that includes tax cuts, legislative ideas and what he calls “cultural shifts.”

The plan drops the business profits tax, which is assessed on income from business activity, from 8.5 percent to 7.4 percent over two years. That would account for about $49 million less in revenue in the next biennium, according to Havenstein’s plan. On average, that tax generates $317 million in revenue, according to data provided by the Legislative Budget Assistant for fiscal years 2009 through 2013.

When asked whether he’d need to cut spending to make up for the lost revenue, Havenstein said the plan would not require cuts if spending stays consistent with growth. The $49 million in less revenue would instead be offset by growth, even if the economy continued to grow at its current “anemic” rate, Havenstein said.

“Rather than think about it as what are you going to cut, let’s make sure we have fiscally conservative policies to make sure our spending is not exceeding our growth,” he said.

There are differences of opinion about what $49 million less in revenue would mean. Charlie Arlinghaus, president of the Josiah Bartlett Center for Public Policy, also says the state’s natural growth in revenue from taxes year to year would be able to offset most or all of that reduction. But leaders at the New Hampshire Fiscal Policy Institute spoke out against a bill this year that would have cut business tax revenue by $39 million in the biennium, saying it would have resulted in cuts to critical services.

Havenstein also proposes rolling back regulations, such as allowing more exemptions from the real estate transfer tax, and better aligning the community college and university systems with workplace needs. While Havenstein was president at BAE Systems, the company donated $1 million to the University of New Hampshire’s engineering school and began a pipeline of UNH student interns to BAE. The plan also includes passing “right to work” legislation and a pledge to veto a sales or income tax, a staple for any candidate seeking New Hampshire’s top office.

The New Hampshire Democratic Party called Havenstein’s plan a return to the agenda of former House speaker Bill O’Brien, who championed right to work legislation during his leadership from 2010 to 2012.

Havenstein proposes having all laws that would affect business come with a “jobs impact assessment,” similar to fiscal notes added to bills that affect the budget. Once the state has new policies in place, Havenstein said he’d seek to aggressively market New Hampshire as a business-friendly state and personally appeal to employers to bring their businesses here. Setting a deadline for creating the 25,000 jobs is a crucial piece of getting there, Havenstein said. He noted that while leading Sanders, he set a similar goal of “8.15.00” on a project to deliver an electronics system for a U.S. military fighter jet.

“The deadline we set for completing that project became the culture of the company, unifying all employees behind a single purpose,” Havenstein wrote in a memo distributed yesterday. “It was a call to action that rallied us all and focused our efforts until we made good on our promise.”

Hemingway

Hemingway’s plan looks quite different from Havenstein’s when it comes to taxes. His plan eliminates the business profits tax, the business enterprise tax and the Medicaid enhancement tax, and it reduce the interest and dividends tax. In it’s place, he would implement a 2 percent business flat tax on wages, salaries, interests and dividends that would apply to all employers, including local governments and some nonprofits. Those entities have an “unfair advantage” in the labor market, Hemingway said yesterday. When asked, Hemingway said he didn’t think additional taxes on local governments would put an increased burden on local property tax payers.

As proposed, Hemingway said the plan would be revenue neutral, but he also said he does not know how many employers now are exempt from business taxes.

Even though this tax extends to new entities, Hemingway says it will lower the overall tax burden. During an interview yesterday with the Monitor’s editorial board, he acknowledged it would be a major shift in tax policy for the state and one that would likely be met with resistance. But, Hemingway said, proposing new ideas is crucial for putting New Hampshire on a strong economic path.

“It’s a big change to what our current tax structure is. I think we really have to be aggressive about this,” Hemingway said. “It’s time for some real change and some real reform, and I believe that my plan does that.”

Hemingway also took a jab at Havenstein’s plan, calling it a “fairytale.” When asked earlier in the day, Havenstein declined to comment on Hemingway’s plan.



(Kathleen Ronayne can be reached at 369-3309 or kronayne@cmonitor.com or on Twitter @kronayne.)