Governor Sununu Protects Taxpayers By Vetoing State Budget - Granite Grok

Governor Sununu Protects Taxpayers By Vetoing State Budget

Gov. Chris Sununu

by Grover Norquist  |

Democrat Budget Would Have Raised Taxes on Businesses and Vapers. 

New Hampshire has long been thought of as a low tax state, governed frugally and therefore a strong competitor among the 50 states to attract job-creating investment, talent, and young families.

Over time, “what everyone knows” can cease to be quite so true. While some other states are reducing taxes, regulations, and reining in spending, New Hampshire has had a long and to date slow drift upwards in the tax burden, level of government spending, and nanny state harassing regulations.

Tortoise. Hare.

How stands New Hampshire in the 50 state competition to create the best environment for families, jobs, and opportunity?

New Hampshire is one of the five states that do not collect a broad-based state sales tax and is almost one of the seven no income tax states (soon to be eight states, as Tennessee is in the process of phasing out its Hall Tax on interest and dividend income from investments). Unless New Hampshire eliminates its five percent tax on interest and dividend income, it will always have an asterisk by its name.

Unsurprisingly, as academic research clearly shows lower levels of taxation and spending correlate with higher levels of economic growth, these pro-growth policies have resulted in New Hampshire having the lowest poverty rate, the third lowest unemployment rate, and one of the highest average incomes in the country.

If it were up to the now Democrat-controlled legislature, however, all of this would change. The state budget for fiscal years 2020 and 2021, which was recently vetoed by Governor Chris Sununu after it passed the legislature along party lines, would have undermined New Hampshire’s long-held reputation as a low tax state by imposing millions of dollars in tax hikes on businesses, and oddly, e-cigarettes, and vapor products.

Back in 2015, when Maggie Hassan (D) was Governor, she agreed with the Republican-controlled legislature that the corporate taxes imposed in New Hampshire were preventing further growth. At the time, New Hampshire’s Business Profits Tax (BPT) rate was a whopping 8.5 percent and the Business Enterprise Tax (BET) was 0.75 percent. That year, Governor Hassan signed Republican legislation that started reducing both of those rates.

The 2015 rate reductions cut the BPT to 8.2 percent and the BET to 0.72 percent in 2016, then to 7.9 percent and 0.675 percent in 2018. The 2018-19 state budget, signed by Gov. Sununu, instituted further reductions. It dropped the BPT to 7.7 percent and the BET to 0.6 percent, effective Jan. 1 of this year. It also scheduled a final phase of rate cuts that will reduce the BPT to 7.5 percent and the BET to 0.5 percent in 2021.

If enacted, the 2020-2021 state budget would have done two horrible things: It would have prevented the 2021 tax cut from taking place, which, contrary to some claims that it would have simply prevented future tax cuts, is accurately described as a tax increase since current law provides for a rate reduction. And, it would have also imposed a retroactive tax hike for 2019. Drew Cline of the Josiah Bartlett Center for Public Policy explains:

“The Committee of Conference budget raises the rates at which employers in New Hampshire have been taxed since January 1. Because it applies to taxes already paid, it would force thousands of New Hampshire businesses to adjust their tax filings. Businesses pay their taxes quarterly, not annually.”

These tax hikes would have resulted in lower wages and fewer jobs. “The preponderance of evidence shows that the corporate income tax harms workers through lower wages,” explains Adam Michel, Senior Policy Analyst for the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget in The High Price That American Workers Pay for Corporate Taxes. “Because the U.S. has a relatively open economy, the tax is shifted from owners of capital to workers, the suppliers of labor. Reasonable estimates show that labor bears between 75 percent and 100 percent of the revenue cost of the corporate tax.”

The bad news for taxpayers would not have ended there. The Democrat budget would have also imposed taxes on e-cigarettes and vapor products, both of which are at least 95 percent less harmful than traditional cigarettes, according to Public Health England and the Royal College of Physicians, among others. That would have been a tax on healthy decisions.

Fortunately for taxpayers, Gov. Sununu vetoed this massive collection of tax hikes to fund overspending. But this is no surprise. Gov. Sununu is one of the pro-taxpayer governors that has signed the Taxpayer Protection Pledge to oppose and veto any net tax hike. He deserves the support of every New Hampshire taxpayer as he fights to keep the New Hampshire difference alive.

(Grover Norquist is the Founder and President of Americans for Tax Reform)