By GARRY RAYNO, Distant Dome
Okay so what happened last week in what was supposed to be a kumbaya moment to assuage the fears of New Hampshire businesses in light of the US Supreme Court’s South Dakota versus Wayfair Inc. decision?
The decision means Granite State businesses selling their products in other states have to collect that state’s sales tax although the company has no physical presence in that state.
Until Wednesday, the script was written and on track: The Senate and House vote overwhelmingly for Senate Bill 1, which would make foreign states jump through hoops to collect the sales taxes.
Gov. Chris Sununu, who sought the special session to blunt the court decision, would hold a signing ceremony in a day or two and everyone would live happily ever after.
Well not really, but everyone would at least appear to have helped the state’s businesses with this foreign sales tax onslaught to “The New Hampshire Advantage” before the Midterm Elections.
The reasoning behind the bill is to make the process difficult enough that most states will not make the effort for the small amount of money they would collect.
A similar plan worked several years ago when Massachusetts billed Town Fair Tire for its uncollected “use tax” on tires sold in New Hampshire to Massachusetts residents.
New Hampshire loathes a broad-based sales tax although the state has a number of sales taxes on specific items like gasoline, beer, cigarettes and home sales.
The plan to scuttle sales tax collections was developed over several weeks by a “high-level task force” of lawmakers from the House and Senate and both sides of the aisle. What could go wrong?
Nothing went wrong in the Senate as the 24 Senators followed the script passing the bill 24-0 and sending it to the House.
Democrats tried in vain to add money for opioid treatment and recovery providers who face significant funding shortfalls because Medicaid expansion is now under the traditional Medicaid Managed Care program and its low reimbursement rates, and to bring attention to the damage the Trump administration’s tariffs are doing to Granite State businesses.
Senate Republicans were having none of the Democrats’ shenanigans and the two initiatives were voted down before SB 1 was approved.
The script was perfect to this point, but the majority of the House wanted to change the ending.
The House has had a way of shooting down key initiatives pushed by the first-term governor. The bills sailed through the Senate for a workforce substance abuse recovery program, school vouchers and additional money for home health care service providers only to be shot down by the House. The House failed to pass its version of the two-year budget presented by Sununu and disrupted his plans for funding full-day kindergarten.
Wednesday the House continued that tradition.
After debate, the House voted 164-151 to strip the bill leaving in place only a study commission and adjourned. The Senate refused to go along with the change, effectively killing the bill for the one-day special session.
Many things — not one thing — created the perfect storm sinking the bill.
Conservative Republicans — many who wanted something stronger forbidding other states from collecting their sales taxes here — joined with liberal Democrats who believed only Congress could address the issue, and others wanted to wait for additional federal court decisions, all joined to tank the bill.
The US Supreme Court ruled on a narrow area and sent the remainder back to a lower court to decide.
“Why not take a step back and let the case go forward before taking action that will be challenged in federal court,” they reasoned.
Trouble was brewing before Wednesday but few thought it would be enough to kill the bill.
The Freedom caucus signaled its opposition the day before the special session.
“The proposal is sorely lacking meaningful teeth to block out-of-state taxing authorities from requiring New Hampshire retailers to collect sales taxes in the wake of the South Dakota v. Wayfair decision,” the group said in a press release. “NHHFC calls for additional provisions, such as the right to private causes of action by NH retailers and consumers against out-of-state taxing agencies, a prohibition on state and local officials cooperating with foreign taxing jurisdictions in collection of sales taxes, and the possibility of a constitutional amendment to remove standing in NH courts for out-of-state taxing entities to collect sales taxes.”
Others expressed concerns the bill would likely be challenged successfully in court and noted the issue is interstate commerce with only a Congressional solution.
House Majority Leader Richard Hinch, R-Merrimack, blamed Democrats for the bill’s defeat. A nice political tactic, but the Democrats are the minority party and don’t have the votes to pass anything on their own.
While Republicans have the votes to pass anything they want, they are not united or good soldiers these days as about 100 more conservative GOPers are quick to buck leadership if they disagree.
Sununu was in Colorado for much of the week returning Wednesday but did not go to Concord for the special session.
“While the House wastes time, they left our state’s small businesses vulnerable to being forced to collect other state’s sales taxes,” said Sununu in a statement. “I have already spoken with the Attorney General and his office will do everything in its power to protect New Hampshire’s small businesses.”
Democrats criticized him for his absence, but a governor’s staff does most of the behind-the-scenes work on lawmakers with the Governor checking in if the vote is close with a few key lawmakers needing to be convinced.
The House and Senate leadership and the governor’s office and most political pundits all believed the votes were there to pass the bill.
They got caught with their pants down and now everything is in limbo.
All but one state have two legislative bodies. There is a good reason for structuring government that way.
The smaller Senate means each senator represents a much larger number of residents over a much larger area than a House member does.
That means senators have to take a broader view of legislation rather than the more focused concerns of each House member.
The Senate can also turn on a dime if things are not going according to plan, while moving the House is like turning the Titanic if something goes wrong.
Inherent animosity usually surfaces at the end of a session and particularly at the end of a two-year term between the House and Senate. The Senate usually wins the end of session battles on bills because senators can afford to be more Machiavellian than the House which has to satisfy a majority of 400 members.
That animosity was real Wednesday. Many House members viewed the bill Special Session Senate Bill 1 as the Senate typically pushing its weight around and insisting everybody jump on the bandwagon.
Others believed the same powerful budget writers were calling the shots while the rank and file House member was unable to contribute.
House Speaker Gene Chandler, R- Bartlett, praised the process’s transparency and he is correct. The problem wasn’t transparency, it was input and that remains to be addressed in the weeks ahead.
Senate President Chuck Morse, R-Salem, predicted lawmakers would soon be back to vote on the same or a slightly different proposal, but that is unlikely to happen with the primary election coming up and many members on vacation in August.
The logical time to tackle the court decision again is when lawmakers return in September for override votes on Sununu’s vetoes, but who knows what will happen.
This has been a very unpredictable legislature for the last two years and that will not change until the November election if then.
Garry Rayno may be reached at firstname.lastname@example.org