Portsmouth Herald- "Businesses fear impact of N.H. tax-credit suspension"

Michael McCord reports in the Portsmouth Herald that area businesses are worried about the impact of new taxes in the state budget:

A New Hampshire Senate budget proposal to suspend a business tax credit has drawn strong opposition from the business community, which believes a recession is the wrong time for lawmakers to nickel and dime struggling companies.

For one Seacoast-based company, a suspension of the business enterprise tax would add to a growing number of financial burdens.

"The BET is just one of many issues that are hurting small businesses right now," said Steve Wood, president and CEO of Work Opportunities Unlimited in Dover.

Bettencourt- "NH Budget Snapshot: Little Hope at this Point for True Fiscal Responsibility"

State Representative D.J. Bettencourt guest-posts at Granite Grok about the lack of fiscal responsibility in the New Hampshire budget:

Elected officials often talk of how business is the backbone of our state’s economy, but too often we fail to walk that talk. Here is an example: The BET is a .75 percent payroll tax that employers pay on their employees salaries. Until now, employers could take their BET obligations as a credit against the BPT. Elimination of this credit will cost businesses roughly $80 million. This essential tax hike is a double hit for businesses that are already facing millions of dollars in increases for the employer costs of unemployment insurance. This action by the Senate significantly hinders New Hampshire’s business climate and promises to make our financial crisis even more agonizing should local businesses be forced to close their doors or move out of state.

Weekend Roundup- Budget Edition

We take a look at the weekend political columns.

In the Union Leader's "Under the State House Dome", Tom Fahey lays out three competing versions of the state budget:

The competing budgets lay out very different solutions. Gas tax versus toll hikes, gambling versus estate and capital-gains taxes; whether to loosen liquor controls, cut business tax credits and/or tap LCHIP money; and how to fund school building aid -- plenty of flash points.

Gambling runs the risk of outright House rejection. The Senate hates the capital-gains tax. Lawmakers and the governor's office have been holding brainstorming sessions on replacement taxes that haven't yet seen the light of day. They include a tax on refinanced debt and closing the limited liability corporation loophole on dividend taxes.

Of course, there's always the Republican plan -- throw all tax hikes in the trash and start cutting the budget. Unfortunately, they admit they don't know where to cut. They said they'd leave it to department heads, the folks they usually dismiss as "bureaucrats." In the GOP's eyes, they are now highly paid policy experts who know the budget best.

Fahey also has items on the business taxes increases in the budget, the dispute over whether the state can confiscate $110 million from a medical malpractice fund, and the debate over toll increases.

Lauren Dorgan's budget coverage makes it off the Viewpoints page with a full scene-setter in the Concord Monitor, but her column does address the chances of getting toll increases through the Executive Council:

After Lynch came out for vetoing the gas tax last month, lawmakers scrambled to figure out how to pay for road repairs. Hence the new Lynch/Senate "aggregation" plan, which hinges on the idea of raising tolls, including increases from $1 to $1.50 at Bedford and Hooksett.

But the Executive Council, which sets tolls, has given a frosty reception to the concept.

After all, councilors just raised tolls in 2007 from 75 cents to $1 - to raise them 50 cents now would mean doubling tolls in just a few years. And, the toll plan is matched with "aggregation," a.k.a. tapping toll booths to pay for repairs on nontolled highways for the first time ever, a plan that has few fans on the council.

"I would say, from what I've been hearing from my associate councilors, that it doesn't even have a half a vote," said Republican Councilor Ray Burton, an enthusiastic backer of the gas tax.

Pignatelli, who has never voted for a toll increase, said she might listen if a toll plan was paired with some relief for toll-ringed Merrimack. But aggregation is a nonstarter for her.

"I do not favor the aggregation of the highway system and the turnpike system," she said.

"It would not be an easy thing to explain why we're paying tolls in the southern part of the state to pay for roads in the North Country."

And in the Nashua Telegraph, Kevin Landrigan also covers tolls, but has word that Governor John Lynch is working with hard to invent new taxes to pay for the state's increased spending:

Gov. John Lynch continued to privately sound out lawmakers and other House players on revenue-raising proposals.

Until April, the three-term governor had been hoping that the federal stimulus cash, restrained spending, higher tobacco taxes, a new gambling tax and a slew of fees would be enough to balance the budget.

The spending and revenue trends of the late spring changed all that, and at this late hour, Lynch is left to scramble in search of ways to raise enough new money to put the state back in the black.

The always-cautious governor isn't tipping his hand about which revenue proposals he'd been willing to accept.

Lynch and associates sketched out the newest – and some believe most promising – revenue concept, which is to go after the untaxable income held by limited-liability companies.

Budget Coverage Roundup

In the Nashua Telegraph, Kevin Landrigan leads with taxes and spending. He notes that the only major change adopted on the Senate floor was a proposal to not raise taxes on businesses by as much as originally planned:

The budget (HB 1) and companion bill that makes necessary changes in state law (HB 2) raises taxes for those who smoke, eat a meal, rent a car or stay in a hotel room and increases fees to use an E-ZPass, register a car, get a driver’s license, have a vanity license plate, register a boat or fish in the ocean.

Senate Republican Leader Peter Bragdon, of Milford, said it was counter-productive to increase state spending over the next two years by more than $250 million when the state faces a severe recession and zero inflation.

“It’s cold comfort the increase in spending is only half the 17 percent in the last budget, and we saw wild revenue projections helped get us in the budget mess we’ve been in,” Bragdon said.

In the Concord Monitor, Lauren Dorgan leads with slot machines, but also reports that the budget is far from complete:

The fight over the budget - and gambling - is far from over. House and Senate negotiators will hammer out a final budget later this month.

Like budget plans drafted by Gov. John Lynch and by House lawmakers, the Senate's $11.6 billion, two-year budget would raise a host of taxes and fees - including taxes on cigarettes, restaurant meals and hotel rooms - and would lay off scores of state employees. Like Lynch's plan, the Senate would shutter the Tobey School, several district courts and the Laconia prison.

The Senate budget, which passed 15-9, would also grant greater autonomy to the liquor commission to, as Lynch puts it, "run like a business." While the House supported a 15-cent increase in the gas tax to fill the state's near-broke highway fund, the Senate plan instead relies on increased car-registration fees and taps revenue from the state's tollbooths to, for the first time, pay for maintenance on roads that are not tolled.

The biggest difference between the budgets: where the money comes from. Lynch's budget, presented in February, projected significantly higher income - about $200 million more - from the state's existing revenue sources than the Senate's budget. The House budget included two new taxes on the wealthy, a capital gains tax and an estate tax, expected to bring in a combined $85 million over the two-year budget. Senators nixed both those plans, instead backing gambling.

And in the Union Leader, Tom Fahey reports that Senators were talking apples and oranges when debating how much this budget increases spending:

Republicans and Democrats debated how much actual spending increases in the Senate plan. D'Allesandro said spending of state funds increases only 0.63 percent compared to the two-year budget that closes June 30.

Minority Leader Peter Bragdon, R-Milford, said the actual increase is 8.8 percent, roughly $270 million, when budget changes and cuts Gov. Lynch ordered over the past year are taken into account.

Business profits tax hike survives Senate, but shrinks

Kevin Landrigan, who is allowed on the Senate floor, reports on the Senate's decision to approve double taxation of New Hampshire businesses, although only for one year rather than two:

At the 11th hour today, Manchester Democratic Sen. Lou D’Allesandro altered plans to take away for two years the suspension of a tax credit for the Business Enterprise Tax for companies that pay the Business Profits Tax.

"We heard loud and clear concerns about this so we would only do this in year two of the budget,’’ D’Allesandro explained.

The revised plan would take away the tax credit for only one year in 2011 rather than for both years of the two-year state budget.

The change created a $40 million hole in the two-year, $11.6 billion budget plan.

Charlie Arlinghuas: The Senate's budget is so bad it should be scrapped

By CHARLES M. ARLINGHAUS

The recession may have made the state's budget situation worse, but today New Hampshire's Senate wants to retaliate by passing a budget that will make the recession worse. The horrible experiment senators hope to embark on makes few concessions to difficult fiscal times, goes out of its way to attack businesses and the potential jobs they could have brought when recovery starts, and just for good measure kicks students out of charter schools.

There's no doubt that the recession has hit New Hampshire's budget hard. Tax revenues for the fiscal year that ends June 30 are down 5 percent over the prior year. This is the first time we've had a drop in regular revenues since 1995.

Going into the budgeting process, everyone predicted an austere budget with reductions in spending. In the middle of a recession, increasing taxes on anyone seemed unlikely. We were all wrong on both counts.

The budget made some difficult decisions, but cutting spending was not among them. There are three or four ways to measure spending, and by all of them this budget shows a substantial increase. In the current fiscal year, the state will spend about $1.48 billion (not including the liquor commission, which is being moved off budget from our general fund). Next year, we'll spend $1.57 billion, an increase of about 6.7 percent, or double the rate of inflation.

Fifteen years ago, Gov. Steve Merrill was also faced with a revenue problem. He chose not to spend more, but to actually reduce spending for the first time in the modern history of the state. Without that reduction, the state would have been forced to raise taxes.

Raising taxes is what the proposed budget does. When people are hard hit by a recession, asking them to pay more in taxes is adding insult to injury. Just as bad, significant increases in business taxes reduce the incentive for companies to move jobs to New Hampshire.

The Senate budget sensibly eliminated the job-destroying capital gains tax the House had passed. Strangely, though, senators decided to do something even worse that will send warning flags to businesses everywhere. They passed a "temporary" increase in the Business Enterprise Tax.

When the BET was created, it was an attempt to make business revenues more stable. Businesses don't pay both the profits tax and the enterprise tax. One is credited against the other so businesses aren't double taxed. The Senate eliminated the credit, increasing the marginal rate of business taxation almost 10 percent.

Businesses react to tax changes even more than individuals do. They don't have to expand jobs or locate in New Hampshire. Whether they believe the Senate's promise that the tax hike is temporary or not, they will avoid territory that increases taxes. We should care because we want to attract more jobs as the economy recovers, not drive them away.

It is difficult to imagine a tax increase more carefully designed to scare off businesses and jobs than this one. The House must fight it when the two budgets are merged to create the final one.

As long as we're talking about stupid taxes, the governor just proposed a doozy. He has few opinions about the budget, but he's releasing a trial balloon for a brand new real estate refinancing tax. Currently, the state taxes you when you sell your house. The governor wants to tax homeowners when they refinance, too. Even if you manage to get out of a bad mortgage, the state's going to hit you on the way out. House Finance Committee Chairman Marjorie Smith, D-Durham, argues that this would "take a bad tax and make it worse." Well said.

Finally, we come to a strange proposal stuck into the budget. Senate budgeters are concerned about charter schools. Last year they stopped any new ones from opening. This time around, they want to cap the number of students at 850. The problem is that current charter school enrollment passed 1,000 late this year. So existing schools can't grow as kids move from one grade to another, and schools will have to hold a reverse lottery to see who gets kicked out. Does that sound like a good idea?

So the budget will increase the education trust fund by 7 percent, but cut charter school spending by 58 percent. Also, despite that $120 million increase in education funding, we're cutting special education aid by $20 million.

If senators pass this monstrosity, they will have to negotiate substantial and irreconcilable differences with the House before final passage. The House should take one look at it and run. It's time for a do-over.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.

Business groups backing tax credit

In the Nashua Telegraph, Kevin Landrigan reports on that New Hampshire businesses are voicing their opposition to the Senate budget.

A broad coalition of business groups urged the state Senate to abandon plans to suspend a lucrative tax credit for profit-making corporations.

About two-dozen business leaders warned Monday this two-year suspension of the tax credit could cause some small businesses to fail and hamper the ability of others to recover from this recession.

BAE Systems lobbyist Jeff Rose said it would increase his company’s taxes by 50 percent and cost in the “millions of dollars.’’

“The elimination of this credit would be a dramatic penalty on job creation in this state,’’ Rose said at a news conference.

The two-year state budget that the Senate Finance Committee recommended would eliminate the credit for 2010 and 2011. Companies claim the credit in payments of the Business Enterprise Tax against what they owe in Business Profits Tax.

NH biz groups pan suspension of tax credit

The Union Leader runs Norma Love's Associated Press article covering the BIA's opposition to business tax increases to fund state spending:

Jim Roche, president of the Business and Industry Association, joined two dozen business leaders in urging the state to cut spending. Roche said businesses are struggling in the poor economy and suspending the tax credit will cost the state jobs and delay the economic recovery.

The Senate Finance Committee proposed suspending the credit for two years to raise $80 million. But Roche said the losses to businesses could be much greater. He predicted lawmakers will eliminate the credit in two years when businesses seek to recoup their losses.

After sitting on the sidelines during last year's budget debate, and seeing spending increase 17.5%, the business community is now getting involved as state budget writers have targeted the private sector to pick up the public sector spending spree.

These tax increases are technically written as the suspension of a tax credit, but you should understand that no one was getting a tax break under current law. Just as federal income taxes are deductible against state income taxes, for those states foolish enough to have such things, the Business Enterprise Tax was fully credited againt the Business Profits Tax to make sure private firms weren't paying the state twice on the same money. The Senate Finance Committee thinks avoiding doubel taxation is a loophole.

Anti-business lawmakers must be stopped now

Foster's editorial page weighs in on the New Hampshire Senate's budget, and its decision to tax New Hampshire businesses during a recession:

New Hampshire's reputation as a state with a business-friendly environment is at risk. It might mean a slower recovery from the recession than was previously thought. We may be in for many more months of hard times. And it is all because of an irresponsible legislative proposal.

The Senate Finance Committee wants the Legislature to suspend the business enterprise tax credit. Why? Because members of the committee and others in the Senate and House are afraid to engage in common sense government — afraid to attack the $11.5 billion budget for 2010 and 2011 from the spending side. The lawmakers have turned to what they see as an easy escape from the budget woes created by runaway spending and overestimations of revenues.

BET credit suspension plan draws fire

New Hampshire Business Review reports on the backlash from businesses facing double-taxation under the Senate budget:

The Business and Industry Association of New Hampshire has launched a “full-court press” to defeat a proposal passed by the Senate Finance Committee early Thursday morning to suspend the business enterprise tax credit against the business profits tax.

But the committee’s chair, Sen. Lou D’Allesandro, D-Manchester, said the suspension was temporary, better than alternatives and was subject to compromise.

“This is one of these difficult choices. We are in difficult economic times,” D'Allesandro told NHBR. “If everybody plays a role we might be able to get through and save some people’s services.”

D’Allesandro emphasized that the suspension in the credit, while “painful,” would be offset by the 10 years proposed to recoup any credits, as opposed to the current five. And it was preferable to a capital gains tax, the estate tax and putting off a planned decrease in the insurance tax -- all of which were contained in the House budget, but eliminated by the Senate Finance Committee.

The BIA opposes those taxes as well and argues that businesses already contribute enough. Any more could further damage a deteriorating economy.

Budget Coverage

The Senate Finance Committee has sent the $11.5 billion dollar, two-year spending plan to the full Senate, after increasing both taxes and spending late into the night.

In the Nashua Telegraph, Kevin Landrigan leads with the fact that a Hudson golf course was left out of the racino sweepstakes:

Proponents of a casino destination resort in Hudson said Senate budget writers "surprised and disappointed" them, crafting a two-year state budget that only legalized slot machines at three racetracks and two North Country sites.

Thomas Friel, co-owner of the Green Meadow Golf Club site, said he thought the Senate Finance Committee plan would permit gambling at slot machine parlors and a casino-style resort to legally co-exist.

The final amendment, surfacing after midnight Wednesday, allowed up to 13,000 slot machines at five sites to generate $185 million over the next two years.

In the Union Leader, Tom Fahey also leads with gambling, and also reports on an increase in business taxes:

House Finance Chairman Rep. Marjorie Smith, D-Durham, said she thinks both House and Senate "agree on the overwhelming majority of what's in the budget."

Besides gambling, she said, sticking points will be changes to the Liquor Commission, funding for highways and the suspension of the Business Enterprise Tax credit against business profits tax liability, she said.

Lynch spokesman Colin Manning said the governor will examine the business tax change, which just made its first appearance this week.

"Obviously, the governor has a lot of serious questions about what this would mean for businesses, how it would impact the economy and future revenues," Manning said.

Currently, New Hampshire pay the Business Enterprise Tax or the Business Profits Tax, whichever is higher. The Senate plan would whack businesses with both.

In the Concord Monitor, Lauren Dorgan highlights the differences between the Senate and House budgets.

Slots aside, the Senate budget closely followed the stark budget plan unveiled by Gov. John Lynch this winter and the one recommended by the House Finance Committee earlier this year; like Lynch, senators would close several district courts, the Tobey School in Concord and the Laconia prison, and lay off scores of state workers. Final numbers weren't available yesterday, but the total likely topped 200.

One major difference: With the recession continuing, senators now expect the state to draw about $200 million less in revenue than Lynch predicted in February. Meanwhile, senators funded some programs Lynch did not, including $1.2 million for a catastrophic illness program and $14 million to help people with developmental disabilities who are on a waiting list for state services. They also voted to fund $87 million worth of aid to local school districts; Lynch had urged lawmakers to borrow that money, and House lawmakers, balking at Lynch's plan to borrow, didn't fund the program.