From ‘A Book, an Idea and a Goat,’ Andru Volinsky’s weekly newsletter on Substack is primarily devoted to writing about the national movement for fair school funding and other means of effecting social change. Here’s the link: https://substack.com/@andruvolinsky?utm_source=profile-page
By ANDRU VOLINSKY
Taxes are not inherently good or evil. They’re a means to an end; the end being supporting the kind of government we want and expect. Taxes are not theft. At times, they are an expression of our priorities. Taxes that fall most heavily on rich people, who are best able to pay them, say one thing about our priorities. Regressive taxes that make poor people pay more than those who are well off say quite another. Ben Franklin is most often quoted as saying there is nothing as certain as death and taxes. I like the earlier use of this phrase attributed to Daniel Defoe in The Political History of the Devil.
In 2017, I arranged for a tax briefing for the Governor and Council by the NH Department of Revenue Administration. As I was the Councilor who arranged for the briefing, I was given the honor of sitting next to Governor Chris Sununu. Commissioner Lindsey Stepp explained that NH’s business tax revenues increased not because of a cut in state business tax rates but because federal tax laws changed in a way that incentivized multinational companies to “onshore” their revenues. NH was a modest beneficiary of these new tax laws. When we heard this, Chris leaned over and whispered, “I didn’t know that. Did you?” I did. That was why I arranged the briefing. Although Sununu is a bright guy, and the facts came from people he trusted at DRA, the message didn’t overcome his political inclinations and NH is now facing the effects of his political leadership.
During the time Chris Sununu was governor, the state voluntarily forfeited about half a billion dollars in business taxes according to the New Hampshire Fiscal Policy Institute (NHFPI) and Republican leaders also accelerated the repeal of the Interest and Dividends Tax which will cost another $300 million in lost revenues by June 2027.
Although NH has a healthy “Rainy Day Fund” of almost $300 million to cushion revenue losses, it is potentially facing three significant challenges. First, the abuse of children detained at the Sununu Youth Services Center (named for John, not Chris, Sununu) has resulted in $102 million in settlements against the state with $469 million in pending claims outstanding. Construction of a desperately needed men’s prison in Concord will cost $500 million though this cost will likely be bonded. The increase in funding for base educational adequacy ordered by Judge Ruoff in the ConVal case will cost $500 million. If we are successful in the Rand School Funding Case, the increase in state expenditures to replace local-tax-funded revenues will be even more. Add to this the loss of Pandemic-Era federal funding and the fact that the Trump administration will likely cut future federal payments to states to fund tax cuts for billionaires.
Given the pickle we’re going to be in as a state, it is appropriate to ask what we got in return for those business tax cuts and phasing out of the Interest and Dividends Tax.
NH has two business taxes, the Business Enterprise Tax (BET) and the Business Profits Tax (BPT). Businesses also pay local property taxes but put that aside for now. The BPT is a tax on the profits earned by big corporations and multinationals for the tiny portion of their business conducted in NH. It was adopted in the early 1970s. The BPT rate decreased from 8.2 percent in 2016 to 7.5 percent in 2023. The BET is a tax on the wages paid by small and medium sized businesses before the wages are distributed to the people who earned them. The BET rate decreased from 0.72 percent of wages to 0.55 percent.
Wait! What?
The BET is a tax on wages. For working people, wages equal income. The BET is an income tax on working people’s wages. People who earn their income through investments don’t pay the BET. With the phase out, they won’t pay taxes on their income derived from interest and dividends on stocks and bonds. They never paid a NH capital gains tax, a sale on the profit from buying and selling assets.
The impetus for the income tax on workers’ wages arose in 1992. NH’s largest employer, a Rochester tech company called “Cabletron” sued the state arguing the BPT was unconstitutional because it fell on too narrow a group of businesses; the big ones, and Cabletron was paying 10 percent of all the BPT taxes. Devine Millimet lawyers represented Cabletron. The Cabletron argument against the BPT is not unlike the argument we make against the SWEPT and its preferences; not everyone in the same group of taxpayers pays their fair share.
Cabletron argued that small and modest sized businesses avoided the BPT by characterizing their “profits” as “compensation” which wasn’t taxed. When Cabletron started, it too paid out profit in the form of compensation to the founding shareholders, but as it grew to be a large, sophisticated company it stopped this practice.
Steve Merrill inherited this BPT loophole problem when he was elected governor in 1992. Cabletron CEO Craig Benson and Merrill quietly negotiated a settlement that resulted in the creation of the BET, which closed the BPT’s compensation loophole.
The legislature enacted the BET at Merrill’s insistence in 1993. A former Republican state rep and tax lawyer, Bill Ardinger, was the primary draftsman of the bill. The initial rate was .02% of all compensation paid by businesses, whether or not the business was profitable.
One of the greater ironies here is that Merrill settled the Cabletron BPT suit by enacting an income tax on workers. He did this while stonewalling the plaintiffs in the Claremont school funding litigation and after he castigated his opponent in the 1992 election, Arnie Arnesen, for openly supporting an income tax. Democratic leadership wasn’t much better to Arnesen after her primary win over Ned Helms, a former party chair, and Norm D’Amours, a former congressman from Manchester.
The BET rate reductions under Sununu caused the revenues it produced to decline in real terms despite growing salaries and wages in the state. NH took in less in BET revenues when Sununu left office then when he entered.
Revenues from the BPT grew even though rates decreased. The overall business tax revenue growth in New Hampshire between 2015 and 2022 was generated by the BPT. So even though NH cut its BPT rates, the revenues for this tax imposed on big businesses who do a little business in the state (think WalMart) grew. They grew, however, at a much smaller clip than would have occurred had there not been multiple decreases in BPT rates.
So what did NH get for taking it easy on some of the nation’s largest business?
Not much.
The rate reductions likely did not spur business growth or create jobs in NH. NHFPI’s statistical analysis found no clear relationship between BPT rates and key economic indicators. Going beyond Sununu, looking at the lifespan of the BPT from 1970 to the most recently available data, the NHFPI found no relationship between BPT rates and state-level employment growth or private sector Gross State Product growth in NH relative to New England, or relative to national Gross Domestic Product. There was also no relationship between BPT rates and inflation- adjusted private sector Gross State Product growth between 2001 and 2021, without comparing NH to the rest of New England. Single-year analyses of job growth and overall economic growth in the years following rate cuts did not suggest the tax rate reductions spurred one-time bursts of business hiring or other helpful economic activity in New Hampshire as compared to the rest of New England.
You should always compare what happened in NH versus what happened in the rest of the New England states to determine if the NH business tax cuts had an effect or whether NH performed virtually the same as the other New England states regardless of the rate cuts. When it comes to who is hired or what is produced in NH and what services are paid for, cutting the BPT on big corporations did not help NH.
So, why cut the rates? Politics. It’s a good political story . . . unless you put it in the context of what NH has not done for its people.
When I took office in 2016, NH was short 20,000 housing units. Today, we remain 20,000 units short. In 2016, NH offered the lowest level of state financial support for its schools, whether k-12 or higher education. In 2016, NH state government provided about $105 million in support to the state’s community college system. In 2025, that level of support will be about $98 million leaving NH families to pay among the highest community college tuitions in the region. There was a small spike in state contributions to the community colleges in 2024, but even this was below the $140 million a year average provided 2006-2011. NH college students also carry more college debt than students anywhere else in the country because NH doesn’t support its public colleges and universities with state dollars. Unlike Maine and Vermont, NH doesn’t contribute state funds to pre-k education even though early childhood education is critically important and daycare is costly and hardly available. NH has lost more than 12,000 k-12 public school students since Chris Sununu first took office. This is not an indication of a healthy, growing state. In NH the rich got richer under Chris Sununu and the rest of NH has little to show for subsidizing big businesses and millionaires.
