Ahead of budget negotiations, business taxes cause sharp divide

  • Gov. Chris Sununu meets with Brien Murphy, vice president of sales at Boyce Highlands Green, a moldings manufacturer in Penacook. ETHAN DeWITT / Monitor staff

Monitor staff
Published: 6/12/2019 6:02:54 PM

Brien Murphy’s relationship with business taxes is as simple as it gets. The lower they are, he says, the easier it is to do business.

“Keeping those employees, with people coming in from out of state, it’s a challenge,” the vice president of sales for Boyce Highlands Green, a Penacook-based moldings manufacturer said Wednesday. “So every dime, every half of a percent, it matters. There’s your profit.”

It’s the sentiment that drove Republican-led cuts to the business profits tax and business enterprise tax over the past four years. And it was the reason Gov. Chris Sununu appeared at Murphy’s Penacook factory Wednesday morning – days ahead of budget negotiations that could determine the tax cuts’ fate.

On one point Gov. Chris Sununu has been clear: Democrats’ proposed roll-back of the five-year business tax cuts remains a non-starter for him.

“Small and large, when you look at business taxes, what might seem like pennies over at the State House are really impactful dollars – tens of thousands of dollars to small businesses,” he said, after touring the facility with a pack of reporters. “The message is clear: When you have a nearly $200 million surplus in this state, we don’t need more tax dollars.”

The scheduled cuts been a constant point of disagreement since November. Democrats say the tax reductions are unnecessary and provide hand-outs to national corporations; Sununu calls the notion of reversing them a “ping-pong” policy that breaks implicit promises to state businesses.

Less clear? How the businesses themselves would be affected. Murphy says Boyce Highlands Green has been planning ahead with the expectation that the business profits tax would drop to 7.5% in 2021. That’s meant making investments in equipment and safety upgrades, he said.

“The reversal here gives us less capital to continue to grow our business and be efficient,” he said. “I would welcome any of the Democrats in the Legislature to come and sit down with me and look at our books. The margins aren’t there to support (a reversal).”

But Democrats argue the businesses would not pay any higher a percentage this year than last year.

Driving that confusion is the nature of the cuts themselves. While the latest tax reduction – bringing the BPT from 7.9% to 7.7% – took effect in January, the tax return deadline for businesses is next April, meaning there is still time to raise the rates before the standard tax calendar ends.

Sununu and other opponents have said doing so would be a mid-tax year increase for businesses. Democrats call it a freeze, given that the full-year 7.9% rate in 2019 would ultimately equal the rate in 2018, despite the temporary dip to 7.7%.

Most New Hampshire businesses are required to file quarterly “estimate payments,” due in April, June, September and December, according to the Department of Revenue Administration. Those payments are made to the department; the following April, businesses receive adjustments based on whether they pay or not.

“I’ve talked to a number of businessmen at the small level ... about this thing of the tax rates going down” said Rep. Susan Almy, a Lebanon Democrat and chairwoman of the House Ways and Means committee. “They say ‘Gee, we haven’t even noticed them.’ Because for them it’s not very much money. I’m sure their accountants noticed them. But they haven’t.”

But others say they’re not so sure what impact the debate has had. “I certainly haven’t heard anything one way or another,” said David Juvet, senior vice president of public policy at the Business and Industry Association, speaking to the lack of clarity on rates this year.

Exactly how businesses are reacting to the uncertainty around the rates is unclear; the quarterly estimates payments filed don’t reflect whether companies are choosing to file with the present year’s rate or the previous year’s rate.

“What we receive is just a very simple form that has their name, their identification number, and the amount of their estimate payment,” said DRA Commissioner Lindsay Stepp in an interview Wednesday. “It’s not until the final return has filed that we know if they’ve over or underpaid.”

In the meantime, the debate on the underlying wisdom of the tax cuts is showing little sign of slowing.

“I don’t know that I’ve ever talked to a business owner that is hoping to pay more in taxes,” Juvet said, laughing. “But we’ll see. We’ll see how it works out.”

Senate Majority Leader Dan Feltes chose a different framing.

“With property taxpayers taking it in the chin while big corporations are getting a break, it’s time to fund a budget that really works forward,” the Concord Democrat said Wednesday.

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



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