By MARK FERNALD
New Hampshire Republicans spend a lot of time talking about tax cuts, but they conveniently fail to mention that the tax cuts have overwhelmingly benefitted the wealthiest people and the largest corporations.
To understand this, we have to look at the tax structure in New Hampshire.
Our state government has many narrow-based sales taxes on restaurant meals, hotels, rental cars, telephone bills, beer, insurance, gasoline, tobacco and real estate transfers.
The state also has two narrow-based income taxes—the Business Profits Tax, and the Interest and Dividends Tax.
The Business Profits Tax was enacted in 1970, and became the State’s largest revenue source. Before 1970 New Hampshire businesses paid property tax on business assets, even if a businesses was losing money. The business property tax was replaced with the Business Profits Tax, which is a tax on the income (profits) of the business–in other words, on their ability to pay.
Small businesses in New Hampshire pay little or no Business Profits Tax because most of their profits are paid out as salary to the business owners. About 75% of the Business Profits Tax is paid by approximately 700 large companies.
The Interest and Dividends Tax was enacted in 1923 to tax the people most able to pay: wealthy people with investment portfolios that generate significant unearned income. In 2022, 91% of this tax was paid by taxpayers reporting more than $20,000 of unearned income.
New Hampshire also has one very broad-based tax: the property tax. Every homeowner pays that tax directly, while renters pays it indirectly through their rent. The only people who avoid the property tax are the homeless.
Since 2015, New Hampshire Republicans have cut taxes several times. Each time, they had to decide who would enjoy the tax cut—everyone, through a property tax cut, or some chosen few.
The taxes Republicans chose to cut—the Business Profits Tax and the Interest and Dividends Tax–says volumes about Republican values.
In 2017, they cut the Business Profits Tax, reducing revenues by $15 million. Big corporations were ecstatic. That year, property taxes increased $116 million.
In 2019, they cut the Business Profits Tax again, reducing revenues by an additional $18 million. Meanwhile, property taxes increased by $117 million.
In 2020, they cut the Business Profits Tax again, reducing revenues by an additional $12 million. Property taxes increased by $107 million.
In 2023, they cut the Business Profits Tax again, reducing revenues by an additional $12 million. Property taxes increased by $222 million.
Finally, in 2024, they cut the Business Profits Tax once more, reducing revenue by an additional $12 million. Property taxes increased by $314 million.
The cumulative amount of the business tax cuts from 2017 through 2023 was at least $496 million, with most of the benefit going to big businesses.
Meanwhile, the total property tax bill for New Hampshire increased by $1.2 billion per year, from $3.6 billion in 2017 to $4.8 billion in 2024.
On top of that, Republicans have repealed the interest and dividends tax, a $180 million annual tax cut, almost all of which flows to the top 10% of households.
So, yes, the Republicans have cut taxes, but time and again they chose to cut the taxes of their wealthy donors.
The tired old response from Republicans is that their tax cuts have paid for themselves by increasing economic growth, leading to more tax revenue.
Our experience shows this is untrue. Adjusted for inflation, New Hampshire’s general fund revenue is lower than it was in 2007. Our state population has grown by over 7% since 2024, increasing the need for government services. Our State’s economy has grown 30% since 2007, so we have the means to provide government services for a growing population. But with State revenue just barely keeping pace with inflation, painful cuts have already been made. For example, the University System is receiving less state support, in real terms, than it did in 1988. When the repeal of the interest and dividends tax is felt next year, there will be a significant decline in state tax revenues, and we will be behind by at least $500 million.
Governor Ayotte says New Hampshire has to “tighten its belt” just like a family, but the analogy is false. If a family is struggling financially, they don’t reduce income—say, by working less. Instead, they try to increase income and reduce expenses. Repealing the Interest and Dividends Tax is like cutting back your hours to part time, and then telling the family they can no longer afford winter coats.
Republicans don’t want you to know that the painful budget cuts they are about to enact are the result of the tax cuts they have handed to the wealthy, because that would undermine their tax cut ideology. But it’s the truth, and every stressed property taxpayer should be asking why.
Mark Fernald is a former State Senator, and a former Democratic candidate for Governor. He can be reached at mark@markfernald.com.
https://nhfpi.org/assets/2024/12/Funding-Public-Services-and-Investing-in-NHs-Future-12.6.24.pdf#page=25 see page 15: 1152 filers pay 76.7% of BPT. And page 26: 19,541 households with unearned income over $20,000 paid 91% of I&D tax.; and see page 25, showing 91% of I&D tax was paid by taxpayers reporting more than $20,000 of unearned income.