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This story was updated April 20, 2021 at 4 p.m.
While the COVID-19 pandemic has created an economic crisis for many, the state has seen a boost in tax revenue, including for tobacco, business, real estate, and interest and dividends taxes. The exception is rooms and meals, which is down 17 percent from what the state had projected prior to the pandemic, according to the state Department of Revenue Administration’s presentation to the Senate Ways and Means Committee Monday.
Sen. Chairman Bob Giuda, a Warren Republican and committee chairman, said the state is doing so well, it is exceeding pre-COVID-19 revenue predictions by $20 million to $30 million each month. That allowed the state to pay off 2020’s pandemic-induced debt by the end of January.
“I’m feeling pretty good,” Giuda said. “I think we will continue to exceed expectations in 2022.” He cited pent up demand for recreation, the state’s low 3 percent unemployment rate, and New Hampshire’s loosening of COVID-19 restrictions, including the end of the mask mandate.
An extension in the filing date means the state may not know the full impact on business taxes during the 2020 calendar year until fall. As of now, revenue from business profits taxes and business enterprise taxes is up 17.2 percent over what the state had projected before COVID-19. The department is projecting a 6 percent and 5 percent increase the next two years, respectively.
Commissioner Lindsey Stepp said the federal stimulus packages have helped businesses perform well, but the final revenue numbers will also reflect fluctuating unemployment rates.
Rooms and meals tax revenue, down nearly 21 percent from pre-COVID-19 projections, has been hit the hardest, Melissa Rollins, senior financial analyst, said. The department is hopeful revenue could get back to 2018 or 2019 totals in the next two years.
“There may be some good news around the corner with the COVID-19 vaccine distribution as well as consumer confidence rising, and then some lifted travel restrictions,” she said. “We do think the recovery rate coming out of this pandemic will definitely increase, and I think we’ll start to see that with the spring months and then a lot more in the summer.”
Tobacco tax revenue, which includes e-cigarettes, loose tobacco, and cigarettes, is expected to end the year up 19 to 21 percent over last year. Stepp said Massachusetts’s ban on menthol and other flavored tobacco is driving up demand in New Hampshire. Typically, the state has seen a year-to-year decline in tobacco tax revenue. The department projects this will be true for 2022 and 2023.
Interest and dividends tax revenue is up 18.6 percent over pre-COVID-19 projections, but Rollins cautioned that may change as tax returns continue to come in. The department is projecting a 4 to 6 percent increase in 2022 and a 4 percent increase in 2023.
“Things to consider: the stock market has continued to perform well and people have more money in the bank, partly due to the stimulus packages,” Rollins said. “So far this tax appears to be unaffected by COVID-19 to date.”
Real estate transfer tax revenue is 27 percent ahead of pre-COVID-19 projections, but the department doesn’t expect this to continue, largely due to a shortage of available real estate and high construction costs. Using prior trends, the department is predicting as much as a 7 percent drop in revenue in 2022 and 10 percent drop in 2023.
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