New Hampshire state senators have proposed raising the threshold for who pays the state’s business profits tax, a move that would eliminate the tax entirely for a narrow band of small businesses.
A bipartisan group of senators on the Ways and Means Committee voted 3-1 to recommend Senate Bill 223, which would increase the lower limit of the BPT from $50,000 in gross profits to $75,000.
That means businesses and self-employed people earning at least $75,000 in gross receipts would need to pay the business profits tax rate – currently 7.7% through to the end of 2021 – but those earning below would be exempt.
The $25,000 jump would help certain business owners avoid what can be a confusing process, lawmakers said.
Many business owners and self-employed people are not aware that they can deduct their own salary from “gross receipts” which can lower their taxable revenues, said Sen. Jeanne Dietsch. In some cases, businesses pay BPT despite falling below the $50,000 threshold and not needing to do so, she said.
Raising the threshold to $75,000 exempts some of those people from that burden, Dietsch said.
“Anyone who’s paying the BPT obviously doesn’t know that they could take off wages,” said Dietsch. “The people who are paying this are probably some of the least knowledgeable about tax law businesses.”
The bill was amended Wednesday to $75,000 after an earlier attempt to raise the threshold to $100,000. Dropping it to $75,000 would cost the state an estimated $300,000 to $400,000 in business tax revenue, according to the Department of Revenue Administration.
The measure was voted for by Sens. Dietsch; Dan Feltes, Democrat of Concord; and Chuck Morse, Republican of Salem. But Sen. Lou D’Allesandro opposed the bill, pointing to impact on the budget.
“It would affect our revenue estimates by $400,000,” D’Allesandro said. “Not a ton of money, but fairly substantial.”
The bill will come before the full Senate in January. If passed by the full chamber, it would head to the House later in 2020.