Riddle: What is worse than a virus sweeping America and the government shutting down much of the economy?
Answer: A Virus, the shutdown, and then a tax hike on your shrinking paycheck.
For New Hampshire citizens this is not a bad joke. This is the future.
The Democrat state legislature placed a tax hike landmine in New Hampshire’s path. They pushed through a law last year in the 2020-2021 biennium budget that basically says “if the economy slows, taxes will be raised on New Hampshire citizens.”
Your job ends. Your paycheck thins. And then Democrats hit you with a tax hike.
How did New Hampshire taxpayers get in this position?
Starting under Gov. Maggie Hassan (D) and continuing through Gov. Chris Sununu (R) before Democrats won control of the General Court, there was agreement in Concord that the Business Profits Tax (BPT) and the Business Enterprise Tax (BET) – a payroll tax – were preventing further economic growth.
In 2015, Gov. Hassan, looking to run for U.S. Senate, signed Republican legislation that phased the BPT rate down from 8.5% to 7.9% and the BET rate down from 0.75% to 0.675% by 2018. New Hampshire prospered.
When Gov. Sununu took office in 2017, he and the Republicans continued on this pro-growth path, scheduling the BPT rate to be reduced to 7.7% in 2019 and 7.5% in 2021, and the BET rate to be reduced to 0.6% in 2019 and 0.5% in 2021.
But in November 2018, Republicans lost control of the state House and Senate and the fate of this much-needed tax relief became a lot less certain. The Democrats were committed to using their first budget to block the 2019 and 2021 rate cuts from taking effect.
Gov. Sununu and the Republicans fought hard against this effort, but in the end, the Democrats were able to slip in a few poison pills.
The Democrats agreed to allow the 2019 tax cuts to take effect but included two tax triggers that are now going to be detrimental to economic recovery.
The first trigger makes the 2021 tax cuts contingent upon state revenues through June 30 coming in 6% over the forecast. The second trigger raises the current BPT and BET rates 2.6% and 12.5% respectively – from 7.7% to 7.9% and 0.6% to 0.675%, undoing the 2019 tax relief – if revenues through June 30 come in 6% below forecast.
Prior to the COVID-19 pandemic, the economy was booming and this whole arrangement seemed unfavorable to the Democrats. But now, the lockdown to prevent the spread of the virus has caused revenues to slump, and it is looking like the people of New Hampshire will face the consequences of the Democrats’ latter tax-hike trigger.
Under normal circumstances, business tax hikes – which are paid by people – result in lower wages, fewer jobs, and higher prices for consumers. After weeks of businesses being forced to close, tax hikes will be devastating, particularly the 12.5% increase in payroll taxes as people are looking for jobs.
Struggling businesses are already doing everything they can to avoid cutting hours, reducing pay, and laying off employees. Many have already had to move forward with these difficult decisions. Stealing the much-needed tax relief they were supposed to receive next year and piling on now with further rate hikes will only exacerbate the economic harm New Hampshire is already facing.
Fortunately, Gov. Sununu and the Republicans are going to do everything they can to stop the Democrat tax hikes from taking effect. “I wholeheartedly agree that this is not a time to raise taxes by 12.5% on our small businesses,” said Gov. Sununu in a letter to Jim Roche, President of the Business and Industry Association.
Gov. Sununu went on, “[t]o punish our employers with a tax increase at a time when many of them are hurting would be terrible public policy and harm our economic recovery. As such, when the legislature returns to Concord, I will call on them to repeal the business tax ‘triggers’ that were included in the state budget passed last year.”
During this time of crisis, Americans have been asking themselves what they can do to help.
New Hampshire’s House and Senate know what they can do. They can be part of the solution by repealing their planned tax hikes.
Grover Norquist (Twitter: @GroverNorquist) is president of Americans for Tax Reform (ATR), a taxpayer advocacy group he founded in 1985 at President Reagan’s request.