As explained in the write-up from the New Hampshire advocacy group, Citizen’s Alliance, Republicans in the New Hampshire house have put forward a bill, HB 386 that proposes to lower the tax burden for businesses in New Hampshire.
Unfortunately as stated in the write-up below, this “burden” is only borne by the largest and wealthiest businesses in the state. These businesses most often are not New Hampshire based or originated, but large global businesses. They will benefit from this cut but New Hampshire residents will have to make up for it. It amounts to a deliberate shift of income upward and out of the state of New Hampshire and the tax burden downward onto New Hampshire residents.
The libertarian wing of the Republican party loves to cry about the costs of government and the burden on New Hampshire businesses. But this argument has no basis in fact and instead relies on a myth created during the Reagan years based on the “trickle down” effect that all citizens would supposedly enjoy.
The UK’s The Guardian’s take on the Laffer curve (they suffered Reaganomics under Thatcher) : So the Laffer Says Tax Cuts for the Rich?
Paul Krugman weighs in : The Laffer Test (somewhat wonkish)
Economist’s View: A forum for economists, this post giving a summary of economist’s general support for the Laffer Curve (hint: there isn’t any) : Laughing at the Laffer Curve
[We aren’t posting those articles in support of the laffer curve or supply-side economics from the Cato Institute or the American Enterprise Institute, or other right-wing orgs which dominate the Google search engine. Both Cato and AEI are in the forefront of pushing any rhetoric that supports the libertarian ideology of getting the rich richer at everyone else’s expense. Since these “thinktanks” feed most national news stories and provide fodder for pundits, we don’t feel we have an obligation to repeat what Americans have drummed incessantly into their ears by corporate media already.]
As a direct result of upward income distribution, big businesses have grown since the Reagan years far faster and higher than real growth in the larger economy. They have used that wealth to hire slick lawyers and lobbyists to wager with, bargain with, manipulate and cajole our legislators on the state and national level to push bills that favor their profit margins while screwing the American public.
This needs to stop. The only way we can stop this is to take action to stop it.
Please read the Citizen’s Alliance summary below. As it says there will be hearings today on the house bill. If you can’t make the hearing, please call or write (email) the members of the committee to tell them to stop large corporations from shifting their tax burden onto the shoulders of New Hampshire residents.
This bill is currently in the House Ways and Means Committee.
Now for the skinny from Citizen’s Alliance:
NEW HAMPSHIRE CAN’T AFFORD A $120 MILLION BUSINESS TAX CUT
Reducing the rate of the business profits tax (BPT) as proposed in HB 386 would principally benefit the very largest corporations operating in New Hampshire. According to data from the Department of Revenue Administration for 2012, just 397 businesses – or 0.7 percent of all businesses filing a tax return – accounted for two-thirds of all BPT collected that year. All of those businesses owed more than $100,000 in BPT that year.
Cutting the BPT rate to 7.0 percent would mean that most of the revenue loss would flow to these very large businesses, most of whom likely have operations across the country and the globe. Smaller businesses would see little to no change in the amount of taxes they owe. In fact, more than 48,000 businesses – or 75 percent of businesses filing a tax return – already owed no BPT in 2012.
Cutting business taxes will force other taxpayers to pay for the public services that big businesses use and rely on to succeed. Cutting state business taxes creates a vicious cycle. Lower state revenues mean fewer funds are available to provide aid to cities and towns. That, in turn, puts more pressure on local property taxes.
There will be a hearing in front of the House Ways and Means Committee Tuesday 2/17/15 10:30 in Room 202 of the Legislative Office Building.
- New Hampshire already faces a substantial budget shortfall in the upcoming FY 2016-2017 budget. Cutting business taxes would only make that problem worse.
- According to the fiscal note, HB 386 would reduce the business profits tax by roughly $120 million in the FY16-17 biennium and every biennium after that.
- To put that in perspective, $120 million is nearly one and half times the entire amount of General Fund support provided to the state’s Community College System in the current FY14-15 budget; it is more than three-quarters of amount provided to the University System.
- In the FY14-15 budget, the Departments of Resources and Economic Development and Environmental Services combined received $67 million from the General Fund.
- In other words, to afford these tax cuts, you’d have to eliminate these departments almost twice over.
- According to data from the Department of Revenue Administration for 2012, just 397 businesses – or 0.7 percent of all businesses filing a tax return – accounted for two-thirds of all BPT collected that year. All of those businesses owed more than $100,000 in BPT that year.
- Cutting the BPT rate to 7.0 percent would mean that most of the revenue loss would flow to these very large businesses, most of whom likely have operations across the country and the globe.
- Smaller businesses would see little to no change in the amount of taxes they owe. In fact, more than 48,000 businesses – or 75 percent of businesses filing a tax return – already owed no BPT in 2012.
Cutting business taxes will force other taxpayers to pay for the public services that businesses use and rely on to succeed.
- Cutting state business taxes creates a vicious cycle. Lower state revenues mean fewer funds are available to provide aid to cities and towns. That, in turn, puts more pressure on local property taxes.
- These cuts will increase the strain on New Hampshire cities and towns and their ability to maintain safe infrastructure and vital services that are central to our shared economic future. State aid to cities, towns, and school districts has already fallen sharply over the last decade – between FY 2000 and FY 2015, such aid is expected to fall by more than $250 million after adjusting for inflation.
Business taxes are already quite low in New Hampshire.
- According to the Council on State Taxation (COST), the overall level of business taxation in New Hampshire ranked 34th lowest in the country in FY 2013.
- COST’s research doesn’t look just at the BPT or BET, but at all the taxes business pay(e.g. property taxes, gas taxes, etc.). It finds that the taxes businesses pay in New Hampshire amount to 4.4 percent of private sector gross state product, below the national average of 4.7 percent and less than 33 other states, including Vermont and Maine.
- Since 2010, New Hampshire has made more than half a dozen changes to either the business profits tax (BPT) or the business enterprise tax (BET), from allowing businesses to write off more of their losses for tax purposes to raising the threshold at which businesses owe the BET.
- Unfortunately, the state still doesn’t know how much all of these changes have cost in terms of lost revenue. If we don’t know the price tag for changes already in place, we shouldn’t put even more on the state’s tab.
- After adjusting for inflation, total General and Education Fund revenue in FY 2014 was nearly $290 million less than what the state collected in FY 2008.
- The combination of the business profits tax and the business enterprise tax together produced $550 million in FY 2014. That’s 19 percent – or $136 million – less than what they generated in FY 2008, after taking inflation into account.
- Extensive economic research indicates that state business taxes, because they are such a small share of business costs, have little to no effect on businesses’ decisions to locate or expand in New Hampshire. Factors like the quality of our workforce and infrastructure are much more important, but New Hampshire won’t be able to provide those if it doesn’t have the necessary resources.
- As Robert Lynch, Chair of the Department of Economics at Washington College puts it:
…differences in tax burdens across states are so modest that they are unlikely to outweigh the differences across states in the other costs of conducting business. These other “costs of conducting business” are the most important factors affecting business investment decisions and include the cost and quality of labor, the proximity to markets for output (particularly for service industries), the access to raw materials and supplies that firms need, the access to quality transportation networks and infrastructure (e.g., roads, highways, airports, railroad systems, and sewer systems), quality-of-life factors (e.g., good schools, quality institutes of higher education, health services, recreational facilities, low crime, affordable housing, and good weather), and utility costs.