Sununu calls for tax cuts, student debt assistance in budget proposal

  • Gov. Chris Sununu presented his 2021-22 budget address virtually, emphasizing tax cuts and policy programs like student debt relief and paid family leave, Thursday, Feb. 11, 2021

Monitor staff
Published: 2/11/2021 2:27:25 PM

Gov. Chris Sununu is pressing for state lawmakers to reduce most of New Hampshire’s major taxes over the next two years – from business taxes to the meals and room tax to the state’s interest and dividends tax.

In an address Thursday laying out his proposed budget, the Republican governor called for a drop in the meals and rooms tax from 9% to 8.5%, a lowering of the business enterprise tax from 0.6% to 0.55%, and the complete phase-out of the state’s interest and dividends tax by 2026.

“Tax cuts for everyone,” the governor said. “Whether you are a small business just starting out, a family of four looking to enjoy a meal out, or are retired and enjoying life in the Granite State.”

Sununu advocated for sending a portion of the money collected from the state’s rooms and meals tax back to cities and towns – a total of $15 million a year in additional aid across the state. He pledged to maintain the education spending in previous budgets. In addition, he pressed for a move toward putting $30 million in excess money from the Education Trust Fund to allow for one-time grants to schools for capital projects. 

“We're not cutting education spending,” Sununu said. “My budget ensures that we spend more money per child on public education than ever before.” 

The budget also contains significant policy proposals, including a plan for student debt relief program, a paid family and medical leave plan, and a plan to create a new Department of Energy in New Hampshire by merging the Public Utilities Commission with the state’s Office of Strategic Initiatives. 

The package of tax cuts is part of a broader strategy to alleviate financial pressures for businesses suffering under COVID-19 – and to make New Hampshire attractive to future businesses, the governor said. The moves align with the priorities of the newly Republican-led Legislature, whose leaders have pressed for tax cuts in their own time. 

But Democrats objected to the cuts, which they characterized Thursday as benefitting major corporations that don’t need the help. Democratic leaders have expressed concern that reduced revenue to the state general fund could mean a downshifting of costs to towns for school costs, which they warn could raise local property taxes. 

“In the next budget, it is critical that we ensure that the costs incurred by the state because of COVID-19 are not downshifted to our homeowners, renters, small business owners, and self-employed workers,” said Sen. Cindy Rosenwald, a Nashua Democrat, in a Thursday morning “prebuttal” of Sununu’s speech. “Now is not the time to offer more protections and tax cuts to out-of-state corporations. Now is the time to make meaningful changes that put money back into the pockets of property taxpayers.” 

In addition to lowering the business enterprise tax – which taxes a business based on how much compensation, interest and dividends it pays out – Sununu is also pushing to raise the threshold for who gets tax.

Unlike the business profits tax, which taxes just the amount of profit a business makes and typically falls on large, established businesses, the business enterprise tax tends to affect small start-up businesses as much as large corporations. Sununu’s budget proposal would limit those businesses hit by the enterprise tax to businesses that have an “enterprise value tax base” of $250,000 or more, which the governor’s office said would exempt 30,000 businesses from paying.

Sununu is also hoping to reduce the state’s interest and dividends tax steadily for five years until it is eliminated entirely, a proposal that's gained traction among Republicans in recent years. Currently, that’s a 5% tax on interest and dividend income for those making at least $2,400 a year from stocks and other investments. 

The interest and dividends tax is New Hampshire’s only effective income tax. Eliminating it, the governor argued, would help out retirees and seniors who invest in the stock market, as well as those with retirement savings investment accounts. 

Democrats, meanwhile, have blasted the reduction as a giveaway to high-income residents of the state.  

Sununu’s budget proposal includes the return of the governor’s preferred paid family and medical leave program. The proposed program would use the state’s 10,000 state employees to create a base pool of employees in the insurance plan, and then allow private sector employers to opt in to the plan. 

For years, Democrats had been pressing for a mandatory program for all employers, which they said was necessary to broaden the pool and keep the program financially viable. But Sununu and other Republicans had criticized the mandatory 0.5% of wage contribution as an “income tax,” and Sununu had twice vetoed Democratic attempts to pass it. 

On Thursday, the governor also unveiled a student debt relief plan, another initiative he had tried introducing in the past under the Democratic legislature. The plan would allow college graduates pursuing fields in health care, biotechnology, social work and other fields in New Hampshire to apply for student debt relief. The proposal would redirect the investment gains the state makes off its 529 college savings plans to pay for the initiative.

Sununu’s proposed budget seeks to merge together several New Hampshire departments. In one portion, the budget bill would combine the University System of New Hampshire with the Community College System, an ambitious proposal the governor argued would help streamline decisions amid declining enrollments. In another, the budget would centralize energy policy under a Department of Energy, creating an energy commissioner while still letting the PUC function as an independent regulatory body within the new agency.  That move would include the creation of the Offshore Wind Industry Development Office, in keeping with the state’s efforts to participate in a wind farm in Gulf of Maine.

The governor’s proposal would also maintain Medicaid rate increases to hospitals and community health providers that went into effect at the beginning of the year. 

The governor’s address Thursday kicks off the legislative budget writing process, which begins in the House and then transitions over to the Senate. Following the speech, the governor’s office formally released its copy of House Bill 1, the bill that lists the budget lines for each state agency, and House Bill 2, which contains the policy changes pushed by the governor. 

The House Finance Committee now will take both documents, hold hearings on them and debate amendments, before sending over a House version of the budget to the Senate. 

(Ethan DeWitt can be reached at 369-3307, edewitt@cmonitor.com, or on Twitter at @edewittNH.)




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