A series of tax cuts proposed by Gov. Chris Sununu and Republican lawmakers could cost the state around $60 million in revenue in the first year of implementation, the Department of Revenue Administration said in a presentation Monday.
In a document given to the Senate Ways and Means Committee Monday, the department said a combination of cuts to the interest and dividends tax, the business profits tax, and the business enterprise tax could reduce revenues into the state over time.
Sununu and lawmakers have proposed using the state budget to reduce the business profits tax from 7.7 percent to 7.5 percent; cut the business enterprise tax – which taxes salaries and other expenses – from 0.6 percent to 0.55 percent; bring the meals and rentals tax from 9 percent to 8.5 percent, and eliminate the interest and dividends tax entirely.
Each of those cuts would bring revenue reductions, according to projections that the department extrapolated from 2020 figures.
Taken together, the business tax cuts would result in about $17 million lost in fiscal year 2023, which begins in July 2022.
The meals and rentals tax would lead to an $11 million decrease in the first half year, and a $19 million drop every year following, the department estimated.
And the five-year proposal to phase out the state’s interest and dividends tax would lose the state around $20 million a year, the department stated in its presentation. Under the proposal in the budget, the 5 percent rate would be gradually reduced by one percentage point every year until 2027, when the tax would be ended altogether. Each percentage point drop would correspond to a revenue drop of between $18 million and $22 million for that fiscal year, the department estimated.
Over the five years the tax was reduced, the state would lose about $117 million, the department said.
The numbers come as the Senate enters the final few weeks in its deliberations on the state budget, which must be cleared out of the Senate Finance Committee by the end of the month.
Republicans have championed the tax cuts, arguing they would boost the state’s economy and relieve burdens faced by small businesses; Democrats have called them unnecessary and a threat to future funding levels.
But the parties have agreed on one tax reduction: a law exempting businesses from paying tax on money they received from the Paycheck Protection Program, a federal loan and grant program established during the COVID-19 pandemic to keep small businesses afloat.
That proposal, which has bipartisan support, would result in about $99 million of revenue loss to the state, the department said.
In June, the budget will enter a “committee of conference” to iron out disagreements with the House, before getting a final vote in both chambers.