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Bob Odell
State Senator
District 8

September 6, 2010

Senator Odell is Chairman of  the Ways and Means Committee, and member of the Energy, Environment and Economic Development Committee;  Finance Committee; Citizens Trade Policy Commission; State Park System Advisory Council; and Comprehensive Cancer Plan Oversight Board.

Senate District 8 towns: Acworth, Alstead, Charlestown, Claremont, Gilsum, Goshen, Langdon, Lempster, Marlow, New London, Newbury, Newport, Roxbury, Stoddard, Sullivan, Sunapee, Sutton, Unity, Walpole, Washington and Westmoreland.

 


While the national economy continues to be confusing and unsettling to the average person there were some brighter revenue results in August for the state.

What is called “unrestricted revenue” was $109 million last month. That was $10 million or 10 percent over the budget plan. Very significantly, revenue was up $15 million or 16 percent over last year. That is encouraging as it reflects increasing economic activity.

The big contributors to beating the budget plan last month were business taxes and receipts from the tobacco tax. The combined revenue from the business profits tax and the business enterprise tax last month was up 32 percent over the budget plan, $13 million vs. $10 million. Business tax revenue was up 45.6 percent over receipts last year.

The August budget plan for tobacco called for $19 million in revenue. It produced $23 million or 9 percent over the plan. The legislature regularly raises this tax and yet it continues to produce increased revenue each year. For the year, the tobacco tax is projected to produce $221 million. 

Meals and rooms tax revenue and income from the Liquor Commission met their monthly goals. The real estate transfer tax, however, was off by $1.4 million or 17 percent shy of its goal. There had been a couple of months in which this tax brought in more than anticipated but with the end of federal tax credits the market has obviously slowed.

All profits from the Lottery Commission go into the Education Trust Fund each month. That money is important because if there is a shortfall in revenue going into the education fund, it has to be made up with a transfer from the general fund. And lottery revenue, a key source of money for the education fund, has been lagging for a long time. 

The Lottery Commission has reported that sales of instant games or scratch cards, as well as the lottery games, have been lower than sales in the prior year. Scratch card sales make up the vast majority of revenue for the lottery commission so a lag in sales there hurts. The lower sales of lottery and scratch cards in New Hampshire runs parallel with national trends for the same kind of products in other states.

New Hampshire has several revenue sources that help to spread the risk during an economic decline. The good results in August, while encouraging, are not on a scale to avoid a major challenge next year as the legislature faces a huge budget gap between projected revenue and costs over the next biennium. 


The current budget is balanced through reductions in spending, using one time sources of money such as nearly depleting our “rainy day fund,” additional borrowings and, of course, the stimulus money that came from Washington.

There is a day of reckoning ahead, but for now we can take some solace that revenues last month exceeded the budget plan.

* * *

While state tax policy is not every reader’s top interest, what taxes we put in place, and their rates, impacts every citizen. Most importantly, our tax policies affect our overall economy. 

Now in the midst of a long serious national economic downturn, New Hampshire is faring better than many other states. Our unemployment rate is much lower than the national average, and while state revenues have been down, they are down less than many other states. Some believe that the “New Hampshire advantage” of being a low tax state and having no general income or sales tax softens the blows of national economic declines.

There are some elements of our tax regime that are not so advantageous. The independent Tax Foundation, a highly respected national organization that studies tax policies, uses five different indexes to rank each state. On corporate taxes, the foundation ranks NH 50th … dead last in the country. Part of that ranking, you can be sure, comes from having the highest business profits tax at 8.5 percent.

New Hampshire ranks 39th for unemployment insurance taxes and 40th for property taxes. Our overall ranking is 7th because of the fact the foundation rates us 9th for income taxes and 2nd for sales taxes. 

When the legislature passed Special Session House Bill 1 on June 9th, what some have called the “budget fix” bill, a provision created a Commission to Study Business Taxes. I have been appointed as one of three Senators on the commission. 

Also there will be four House members and five members of the public appointed by the Governor. Each public member will represent different areas of experience and expertise including tax experts and accountants; small business; real estate, finance, and investment; and business trade associations.

The commission will look at the current system of business taxation in New Hampshire, including the rates and allocation among taxpayers of the business enterprise tax, the business profits tax and the interest and dividends tax. An interim report is due on December 1 and a final report on November 1, 2011.

A periodic look at every state operation makes sense and that includes our business tax set up. Taxes should not be so burdensome that businessmen and women look for other states in which to conduct their business. Taxes need to be fair from the standpoint of who pays and how they are collected.

Bob Odell
State Senator
New Hampshire State House
107 North Main Street
Concord, NH 03301-4951

Telephone:  603-271-6733
Email:  rpojr@aol.com

 

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