It has been a while since we reported on the action by the Senate earlier this year to approve reductions in the business profits tax (SB 1) and the business enterprise tax (SB 2). These bills were approved by a majority of the Senators, but once approved they were immediately placed on the table in the Senate and were not sent over to the House. This procedural move was done precisely so that the tax reductions could be included in the State budget at this point in the process, when the Senate had a better handle on the state revenue outlook for the coming biennium.
Early yesterday, the Senate Finance Committee approved amendments to the state budget trailer bill (HB 2) which, among many other things, would enact these tax reductions in somewhat altered form. The new amendment keeps the same numbers but changes the implementation dates so that the reductions are phased in from 2016 to 2019 (SB 1 and SB 2 started the phase-in in 2015). The HB 2 amendment brings the BPT down to 7.9 percent and the BET to .675 percent by 2019.
The theory behind the reductions, as articulated by Senate President Chuck Morse during the Committee deliberations on Tuesday, is that the business tax reductions are necessary in order to incentivize and stimulate business development in New Hampshire. Senate Democratic Leader Jeff Woodburn opposed the cuts as measures that will reduce state revenues, but Senator Morse called the tax reductions as important as the restoration of the social services funds which the Senate Committee was able to achieve in this budget, because in his view the stimulation of the economy will actually lead to increased tax revenues for the State.
This piece of the budget unquestionably is going to pass the Senate this week, along with the rest of the budget amendments that were approved by the Finance Committee. We will see what the House thinks about all of them pretty soon when the budget committee of conference meets in the middle of June.