House Rules Committee votes against GOP request to suspend business tax triggers

Monitor staff
Published: 6/6/2020 5:54:42 PM

House Democratic leadership has rejected a proposal to suspend business tax triggers due to the pandemic, arguing more information is needed before doing so.

In a party-line vote Wednesday, Democratic members of the House Rules Committee voted against an effort by House Republican Leader Dick Hinch to eliminate the trigger mechanisms that could cause New Hampshire business taxes to rise in 2021 if revenues fall below target.

Under last year’s budget compromise between State House Democrats and Republican Gov. Chris Sununu, the Legislature passed a two-way trigger. The business profits tax could stay at 7.7% through 2021 if tax revenue stayed stable. If more came in via business taxes than was expected – if revenue was 6% higher than planned – the tax rate would go down. If less came in than planned – at least 6% less – the tax rate would go up.

The idea was to modulate the tax rate to allow the state to guarantee sufficient revenue while not overtaxing business. But Republicans have argued that the pandemic and the state-ordered shut down of non-essential businesses is a unique circumstance. A loss in revenue in these times, Republicans say, should not lead to the taxes being raised.

Hinch’s proposed rule change, which has been endorsed by Sununu, would eliminate the trigger to raise taxes. Those taxes would take effect on Tax Day in April 2021.

“New Hampshire businesses are facing unprecedented losses,” said Hinch. “We have the ability to ease the burden on our state’s job creators by addressing the tax triggers in current law.”

But Democrats say the push to suspend the triggers is too soon, and that not enough is known about what the revenues are yet. Under the budget law, the tax hike trigger is based on how much comes in for Fiscal Year 2020, which ends June 30. Whether or not the state has hit the trigger will not be confirmed until December, when the state’s Comprehensive Annual Financial Report is released.

“For me it does not feel like this is the time for us to be changing what we voted on in the budget in September,” said Rep. Mary Jane Wallner, a Concord Democrat.

Hinch and others retorted that the tax triggers had passed with an eye to economic situations that did not involve a pandemic and mandatory shutdown of many businesses.

“I would just like to remind everyone the pandemic occurred during the month of March, and this is urgent and compelling at this time,” he said. “It was unseen at the time the budget was passed and put into law.”

And other Republicans said that the Legislature should repeal the triggers to remove uncertainty, so businesses could plan their tax filings into 2021 at the present 7.7% rate.

Some Democrats, though, said that the change in the business profits tax rate – from 7.7% to 7.9% if the trigger was hit – would not affect many businesses. Most small businesses are not large enough to pay the BPT, but pay the BET, which would also rise, they noted. And they said the hike for any business would not be a significant factor.

“Many businesses are in terrible straits, but I think it’s very unlikely that for those businesses in dire straits that the change in the tax rate that we’re talking about is going to make a material difference as to whether they open or not,” said Rep Lucy Weber, a Walpole Democrat.

The vote to suspend the tax triggers failed 6-4. Hinch said he would revive the effort on the House floor next week when the House meets at the Whittemore Center Arena in Durham.

Constitutional amendment

The COVID-19 pandemic has pushed business operations online, forcing employees stuck at home to learn video chatting technology and etiquette.

But since the beginning, one body that couldn’t fully embrace technology was the New Hampshire Legislature.

Because of a stipulation in the state constitution, lawmakers must meet in person in order to conduct floor business, the House Speaker and Senate President have said.

The limitation has prevented the whole House and Senate from convening, even as individual committees have carried out their business over Zoom and conference calls.

Now, House Speaker Steve Shurtleff is proposing allowing an exception to that limitation. But doing so will require the constitution itself to be amended.

During the Rules Committee session Wednesday, Shurtleff sought to introduce a Constitutional Amendment Concurrent Resolution that would permit remote voting for the House and Senate.

The amendment, if passed by a three-fifths majority in the House and Senate, would go to voters on the ballot in November.

New Hampshire’s Legislature, which once met every other year, has only hosted a session outside of the State House in Concord once – in 1864 due to renovations.

After the Pearl Harbor bombing attack in 1941, the state changed its constitution to allow for remote voting in extraordinary circumstances “resulting from disasters caused by enemy attack.”

That situation has never arisen, and the State House has still never voted remotely. Shurtleff’s proposed amendment would expand that clause to also include state or national emergencies declared by the governor or U.S. president.

Shurtleff argued the mechanism was necessary, even if it may not be used. Due to the timing of the constitutional amendment process, it would not be available to the Legislature until January 2021 at the earliest.

“Now realizing how important it is, we do need a mechanism to allow the New Hampshire House to meet online and in remote locations,” he said.

Republicans, however, said it was too big of a change to be pushed through the legislative process in a matter of weeks.

“Whenever we make an amendment to the constitution, it should be done with a very, very vigorous vetting,” Hinch said.

“I haven’t made a decision of whether I will support this,” he added. But, he said, “I have grave concerns about bringing this forward in an expedited fashion.”

The constitutional amendment was approved 6-4, on the objection of Republican members.

New faces

A newly-elected state representative from Hooksett will be sworn in next week – just in time for Thursday’s unique House voting session.

Representative-elect Kathleen Martins, a Democrat, will be sworn in remotely by Gov. Chris Sununu at Wednesday’s Executive Council meeting.

That meeting, June 10, will be one day before members of the House will show up in person at the University of New Hampshire Whittemore Center Arena in Durham. The space has been chosen to allow members to sit at desks spaced 6 feet apart.

Martins won her seat in March, in an upset special election following the death of Rep. Dick Marple, a staunch conservative. Martins defeated Elliot Axelman, a libertarian-minded Republican, in a win touted by Democrats as a sign of shifting political winds ahead of November.

But after weeks in which Martins was not sworn in, House Democrats expressed concern that if she were not sworn in by the Durham voting session, she would miss the last major session of the year and the time and effort in the special election would have been wasted.

Late last month, Shurtleff wrote a letter urging Sununu to sign Martins in June 10. In a statement Thursday, a spokesman for the governor, Ben Vihstadt, said that the governor would.

“Our office was waiting for official guidance from the Attorney General’s office regarding a virtual swearing-in,” Vihstadt said. “This week we received word that the swearing-in could occur virtually, so the Governor intends to swear Representative-elect Martins in next Wednesday.”

(Ethan DeWitt can be reached at edewitt@cmonitor.com, at (603) 369-3307, or on Twitter at @edewittNH.)

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