Distant Dome: State Revenues Running Well Ahead of Estimates

Print More

Nancy West photo

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


The initial figures for state revenue collected in the 2023 fiscal year ending June 30 shows the state collected $539 million more than predicted by budget writers two years ago.

During the last 10 fiscal years with one exception, state revenue surpluses have shown a steady increase growing from $5.8 million in fiscal 2014 to last fiscal year’s $539 million.

The one exception is fiscal year 2020 when the COVID-19 pandemic shuttered many of the state’s businesses for months producing a revenue deficit of $142 million.

With help from federal relief and recovery money over two presidential administrations to fuel the economy, the surpluses since that time have been in the multi hundreds of millions-of-dollar range: $280 million in fiscal 2021, $430 million in fiscal 2022 and this year’s $539 million surplus.

This year’s number however has not been audited and the ones cited above for other fiscal years were also before the audited figures for those years were completed so it would be an orange to orange comparison and not oranges to apples.

From fiscal 2015 the yearly revenue surpluses were $42 million, $99 million, $92 million, $128 million and $190 million in fiscal 2019 before the pandemic began.

To understand why the growth has been so pronounced after the pandemic you have to know who pays taxes in New Hampshire.

The biggest contributor to the growth in revenue since the pandemic has been the two business taxes, the business profits tax and the business enterprise tax.

The vast majority of money generated by the business profits tax is by multi-national or national corporations or conglomerates with numerous kinds of industries or services.

The economic slowdown from the pandemic had little effect on them and instead many thrived with the rush to find personal protection equipment and medical services including vaccines.

Much of the money the federal government pumped into the economy benefited these huge corporations and generated billions if not trillions of profits that New Hampshire and other states taxed.

The business enterprise tax is aimed at New Hampshire businesses and is a kind of business added tax on business activity in the form of payroll, dividends and interest paid on loans or other borrowing.

The tax was instituted to settle a lawsuit filed by the owners of once powerhouse Cabletron who claimed the state business tax system was discriminatory or disproportional in that manufacturers were hit by the business profits tax while large law firms or medical practices were not because they could use their profits for salary increases or bonuses.

While the business profits tax is an indicator of how well multinational corporations are doing, the business enterprise tax is reflective of state-based businesses and how well they are doing and not so much BAE or Fidelity.

The initial figures from the 2023 fiscal year shows the business profits tax had a surplus of $327.6 million on revenue of $974 million, while the business enterprise tax produced a revenue deficit of $4.4 million on revenues of $306.8 million.

Together however, they produced $1.28 billion for a $323 million surplus.

Unlike other states where income or sales tax are the biggest revenue generators, in New Hampshire business taxes account for 40 percent of all general and education funds for state government that total $3.23 billion in the 2023 fiscal year.

While business taxes have fueled the revenue surpluses in recent years, the rates of the two taxes have dropped considerably since 2016 to line up with other New England states which also, remember, have income and sales taxes.

The rates will not go down during this biennium, but the only tax the state has that corresponds to wealth, the interest and dividends tax, will end on Dec. 31, 2024, in the budget passed by lawmakers this year. Originally the tax was to phase out two years beyond that date, but was moved ahead a year in the last budget and again in the budget approved in June.

In the 2023 fiscal year, the tax produced $150.6 million, a revenue surplus of $14.8 million. That is more than $50 million lawmakers gave to the University System of New Hampshire this fiscal year, to understand the impact of ending the tax paid by a small portion of the state’s population who earn more than $2,400 a year in dividends and interest, with $1,200 exemptions for those over 65 years old, blind or disabled.

While some called it an income tax on the elderly or retired, it is really an income tax on the wealthy with significant stock or other financial instruments.

The second biggest revenue producer for New Hampshire is the rooms and meals tax, which last fiscal year produced $317.3 million. The tax took a significant hit during the pandemic but has been rebounding nicely since and draws on the tourists coming to New Hampshire to pay a hefty share of the levy. And like many other states dependent on the tourism industry, like Florida or California, it has a higher rate than many states who do not.

New Hampshire has long had a series of sales taxes on various products or so-called sin taxes on such things as tobacco and liquor and if Gov. Chris Sununu has his way, cannabis beginning next year.

The tobacco and beer taxes and revenue from liquor sales all had revenue deficits for the 2023 fiscal year, the tobacco tax the largest at $24 million.

The one sin tax producing more than estimates for the past fiscal year is revenue from the Lottery Commission, which has seen a number of large national jackpots fuel the state’s take which feeds the Education Trust Fund.

The lottery produced $188.3 million in fiscal 2023, while the Education Trust fund is estimated to hold $1.2 billion for the same fiscal year.

The state’s real estate transfer tax paid by both the buyer and the seller continues to produce better than budget writers anticipated with a revenue surplus $27.2 million indicating the real estate slowdown has not impacted state revenue as prices continue to hold steadier here than in many other places, although the revenues are down from a year ago.

Along with the sin taxes, another levy that is growingly obsolete is the communications tax which is largely on telephone landlines, which everyone knows are becoming scarcer and scarcer.

Sununu had proposed eliminating the tax, but lawmakers decided to keep it at least for the time being.

And the state benefited not only from the federal money, but also from the interest earned on the federal money which the state invested.

Other states are also riding the influx of federal money to record revenues but there is an end to the federal handouts.

The federal money begins to dry up this coming fiscal year and will end by the end of the biennium and the state’s revenue picture may be quite different at that time.

The good times will not go on forever, and the state’s revenue system is not built to weather major storms because of what economists call its inelasticity.

If you were governor during the past few years, this might be a good time to move on because your successor will not be blessed with the kind of revenue surpluses that have benefited you.

And a great deal of what is included in the budget passed last month is not what you would call one-time money like Medicaid provider rate increases, additional money for school funding, state employee pay raise or housing initiatives.

The current budget grows state government significantly, something that has not happened for some time.

Garry Rayno may be reached at garry.rayno@yahoo.com.

Distant Dome by veteran journalist Garry Rayno explores a broader perspective on the State House and state happenings for InDepthNH.org. 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.

Comments are closed.