Dems Give Up Capital Gains and Family Leave, But Sununu Veto Still Looms

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Garry Rayno is's State House Bureau Chief. He is pictured in the press room at the State House in Concord.


CONCORD – No one should be surprised the Democratically controlled legislature and the Republican governor are at odds over the $13 billion, two-year compromise budget House and Senate negotiators crafted last week.

House and Senate negotiators had few disagreements about what to include in their budget plan. They agreed on: education funding and additional property tax relief, protecting children and their health care, more money for Medicaid and behavioral health providers, boosting access, facilities and services for the mental health system, more resources to fight the state’s long festering opioid epidemic and eliminating the developmentally disabled waiting list for services.

Gov. Chris Sununu’s proposed budget emphasized many of the same issues, maybe at slightly lower funding levels, but not education funding and municipal revenue sharing, Instead he proposed a school building and renovation plan and a $52 million infrastructure revitalization program.

The governor’s plan reaches $13.1 billion in total spending from state, federal, highway, fish and game and other funding sources, while the compromise budget has total spending of $13.3 billion or a difference of $200 million.

General funds, or the money from the state’s tax system largely dependent on business and sales or user taxes of one sort or another, show more of a difference than total spending.

The compromise budget spends $5.5 billion in state general funds, which is approximately $500 million more than the budget proposed by Sununu.

Where is the difference? The compromise budget spends a surplus between $160 million to $170 million, depending on who is counting, $90 million in business taxes and uses different methods of accounting for the education trust fund money.

That additional spending is where the differing philosophies of government become most apparent.

Former long-time House Finance Committee Chair Neal Kurk, R-Weare, used to say the state’s fiscal system is built to limit revenues so every two years lawmakers have to decide the priorities.

In other words most people are familiar with the adage “you have to live within your means.”
Given that philosophy, the overall needs take a back seat to what state taxes produce from year to year.

That does not mean a Republican controlled legislature does not respond when there is an opioid crisis or to establish the Medicaid expansion program to cover the uninsured, but it does mean some other areas may not receive the money they might have if not for that year’s crisis.

But it does mean when revenues fall far short as they did a decade ago, draconian cuts are made as the Republican-controlled legislature slashing in half higher education funding, eliminating whole programs for young people like Children in Need of Services and turning the tax on hospitals into a real tax instead of a pass through after the money is used to match federal dollars.

However, the state is not in a fiscal crisis and has had a revenue surplus for the last five or six years and much of that money has been used to reduce business taxes and build up the state’s rainy day fund.

And Sununu in his proposed budget tried to use the surplus for one-time capital projects and grants rather than put the money into ongoing programs.

The theory is if that money goes into the operating budget, those programs will not be sustainable when the economy turns sour, as it will.

This philosophy is reflected in the statements from Republicans after the compromise was reached last week.

“The budget being proposed increases business taxes, threatening an economy with the second lowest unemployment rate in the nation and the highest per capita income,” said former Senate President and now Senate Minority Leader Chuck Morse, R-Salem.

“The spending decisions in other parts of the budget make the increase in education funding unsustainable and will only lead to an income tax or capital gains tax. Promises that have been made by Concord Democrats in this budget cannot be kept and I look forward to supporting Governor Sununu’s veto.”

Democrats take a different approach. They look at the needs first. What are the areas that need to be addressed?

In their proposed compromise plan, those areas are property tax relief, children’s protection and services, mental health and substance abuse, access to health care, paid family and medical leave, and housing for the poor and those in substance abuse recovery.

They boosted state aid for public schools with an eye toward helping the ones in distress as well as higher education, and reestablished revenue sharing for the first time in 10 years.

They increased reimbursement rates for Medicaid providers, and for those treating mental illness and substance abuse, and provided for additional child protection staffing and money for a mobile crisis unit for children.

All of that requires more money and if there is not enough money to address those needs, then taxes have to be raised.

The House this session approved extending the interest and dividends tax to capital gains, and established a .5 percent payroll tax to pay for paid family and medical leave.

The Senate did not go along with the capital gains tax, but did with the .5 percent payroll tax, and instituted a series of tax reforms long sought by some of the state’s businesses to bring New Hampshire in line with many other states.

The reforms remained in the compromise budget although most will not go into effect until the next biennium, but the paid family and medical leave program Sununu and Republicans called an income tax was removed from the budget during the conference committee to try to avoid a Sununu veto, which also was a lock if the capital gains tax remained, which it did not.

But they did not remove the “freeze” on business tax rates at the 2018 level, negating the reduction scheduled for this calendar year.

The freeze produces $90 million that Sununu did not include in his budget.

The business tax reductions that began with the 2016 fiscal year budget and have continued since then, stand as the hallmark of Republican controlled legislatures claiming the reductions are the reason for the state’s robust economy. 

While businesses wanted the initial reductions to bring the rates more in line with surrounding states, they never asked for additional cuts but were glad to accept them as would anyone.

Whether or not you believe they are the main reason the state’s economy is booming falls mainly down party lines.

But it is an argument Republicans cite as the reason the compromise budget should be vetoed.

However, one legislature cannot bind another, so this legislature in Democratic control is under no obligation to continue the rate reductions, which have become the turning point.

Democrats say they gave up the capital gains tax, and the popular paid family and medical leave program, and Sununu should realize he cannot have everything he wants in a budget.

Complicating the picture for Sununu are the business tax reforms many prominent New Hampshire businesses want more than the rate reductions.

Without the business voices, the decision would be simple for Sununu.

What the governor does after the House and Senate vote to approve the budget compromise Thursday will be closely watched.

Democrats don’t have the votes to override a budget veto, but believe they have given enough to meet the governor more than halfway. Sununu may not see it in quite the same way, after all differing philosophies are at work here.

Garry Rayno may be reached at

Distant Dome by veteran journalist Garry Rayno explores a broader perspective on the State House and state happenings for Over his three-decade career, Rayno covered the NH State House for the New Hampshire Union Leader and Foster’s Daily Democrat. During his career, his coverage spanned the news spectrum, from local planning, school and select boards, to national issues such as electric industry deregulation and Presidential primaries. Rayno lives with his wife Carolyn in New London. is New Hampshire’s only nonprofit, online news outlet dedicated to holding government accountable and giving voice to marginalized people, places and ideas. 

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