The Democrat committee of conference budget proposal will hurt our economy by raising taxes on job creators. It spends more taxpayer dollars than ever before, raising spending by over $1.5 billion dollars, and spends one-time revenue to grow government, which will create a budget deficit that sets us up for an income, or other broad based tax. It is unbalanced, and built on inflated and unreliable revenue estimates. This is a bad budget that sets us our state up to fail.
The proposed committee of conference report on HB1 and HB2 would reverse a tax reduction for the current tax period, raising the Business Profits Tax (BPT) from 7.7% to 7.9%, and raising the Business Enterprise Tax from .6% to .675%, costing small businesses and job creators $90 million more dollars over the biennium. In addition, the report also proposes to repeal future tax reductions in current law.
Spends Taxpayer Money at Record Levels
The proposed budget spends $1.5 billion (13.3%) more than the previous budget (total funds), and $631 million (12.8%) more in General and Education Trust Fund dollars. This is an unprecedented increase in spending of taxpayer dollars in New Hampshire, and it is unsustainable.
Spends One Time Revenue on Growing Government
New Hampshire will have a budget surplus of over $200 million this fiscal year. Responsible budgeting practice would be to use this money for one-time spending, since we can’t always rely on good economic times and high performance revenue. Democrats have proposed to use this surplus to grow government operations perpetually. If revenue should not perform as well in future years, we will have a built-in structural deficit.
Inflated Revenue Estimates
The revenue estimates for FY2019 are within reason but not so for FY2020 and FY2021. In FY2020 and FY2021 they raised the Business Taxes base revenues $32.6M and raised the anomalies $15.7M for a total of $48.3M higher than the House estimates. These estimates are more than pushing the envelope. Other estimates (Tobacco, Liquor, I&D, Real Estate Transfer, Securities, and Utility Property Tax) are also pushing the envelope mostly by one to three million each. This makes the total estimates for the General Fund and the Education Trust Fund higher by at least $75.5M over the reasonable House estimates.
These revised revenue estimates were not evaluated by the House Ways & Means committee prior to their introduction and adoption in the committee of conference. In addition tobacco revenue estimates were not revised after the committee made the decision to raise the tobacco access age from 18 to 21, which will definitely have a negative effect on revenue.
Democrats can’t help themselves. In order to spend as much money as they can, they notoriously get creative with their revenue projections to make it look like they’ve produced a balanced budget, when, in fact, they are spending money we can’t reasonably expect to come in
What Tax and Fee Increases did Democrats add to the budget and are now contained in the committee of conference report?
Sections 225‐228 Various related to BPT and BET
Increases the BPT rate from 7.7 to 7.9 percent and the BET rate from .6 to .675 percent and repeals prospective rate reductions. Estimated revenue of $37.6 million in FY 2020 and $55.5 million in FY 2021 to the General Fund and Education Trust Fund.
Section 234 Motor Vehicles; Copies of Certificates and Motor Vehicle Records
Increases the fee paid by insurance companies or any other authorized agent requesting a copy of any motor vehicle record by $1 from $12 to $13. Estimated revenue of $500,000 in FY 2020 and $500,000 in FY 2021 to the Fire Standards and Training and Emergency Medical Services Fund.
Section 235 Motor Vehicles; Drivers' Licenses; Real IDCompliant; Fee
Increase fee for Real ID Act compliant license by $10, from $50 to $60. Estimated revenue of $434,000 in FY 2020 and $521,000 in FY 2021 to the Highway Fund.
Sections 271‐273 Internal Revenue Code Conformity
Aligns NH tax code to the IRC of 1986 in effect on December 31, 2018 (The Tax Cuts and Jobs Act), however remaining decoupled from section 179 of code and the GILTI provisions. Estimated revenue of $21.25 million in FY 2020 and $21.25 million in FY 2021 to the General Fund and Education Trust Fund.
Sections 274‐280 Communications Services Tax
Clarifies the applicability of the communication services tax on VoIP and prepaid wireless communications service. Estimated revenue of $1.5 million in FY 2020 and $2.5 million in FY 2021 to the General Fund.
Sections 296‐312 Department of Environmental Services Water Resources Fund and Fees
These sections are the language of HB 682 relative to increasing certain application and permit fees and establishing the water resources fund. The Department estimates the fee changes will increase revenue by $2,340,000 in FY 2020 and by $2,340,000 in FY 2021 to the Water Resources Fund.
Sections 452‐453, Business Profits Tax Apportionment (Market based)
These sections change the BPT apportionment to allow for use of the market based sourcing method. Estimated revenue increase of $10 million in FY 2021 to the General Fund and Education Trust Fund.
Note: The above referenced revenue estimates are based off of what the revised estimates adopted by the committee of conference, and we believe are inflated to enable higher spending.
What are some other bad high-level policy proposals that Democrats added to HB2?
Section 377 New Hampshire Granite Advantage Health Care program: Trust Fund
This section allows general funds to be used for the New Hampshire granite advantage health care program
Section 103 Youth Access to and Use of Tobacco Products
Raises the age for youth access to tobacco from 18 to 21
Section 282 Housing Appeals Board
This board would be given the power to overrule local governing boards who may vote to deny certain applications relative to housing and housing development
Section 394 Repeals the prohibition on reproductive health facilities from using state funds to provide abortion services is repealed.
Sections 255-259 Introduces a brand new education funding formula that has not gone through the legislative process, and is fiscally unsustainable.