CONCORD, N.H. -- New Hampshire’s two main Republican gubernatorial candidates both propose cutting business taxes -- the state’s largest revenue source -- without saying how they would pay for the cuts.
Kevin Smith’s proposed tax cuts could potentially cost the state more than $1 billion in lost revenue by 2020 -- if his premise that lower tax rates will boost revenue isn’t realized.
His main rival, Ovide Lamontagne, has a more modest tax cut proposal that could mean $120 million in lost revenue during the same time frame.
Both also propose other tax changes that are more difficult to estimate, such as credits. Those could mean even more revenue losses.
Neither candidate has outlined specific budget cuts they would seek to pay to offset the tax cuts. Both propose to look for efficiencies during the budget-writing process.
Lamontagne called his plan "practical, reasonable and achievable" in a statement and said it included a provision that would require spending cuts if tax revenues fall. He did not specify what those cuts would be but pledged to take "a hard look" at the budget. "We will be able to realize significant savings through modernization, consolidation and privatization that can be passed on to fund these tax reforms and spur our economy," Lamontagne said.
He proposes reducing the 8.5 percent tax on business profits to 8 percent over two years. That could cost the state
Smith proposes much deeper tax cuts. He would gradually reduce the tax on business profits from 8.5 percent to 5 percent by 2020. He would cut the business enterprise tax, which is a tax on wages, borrowing and dividends, from 0.75 percent to 0.25 percent over the same period. The proposal could cost the state $1.2 billion in lost revenue by 2020, based on rough calculations using 2012 BET receipts. If completely phased in, the state’s business tax receipts could be half what they are now.
The calculations do not take into account possible offsetting revenue from an improved economy or the potential revenue gains from reducing the tax and with it the amount of tax credits that businesses are eligible for. Smith argued his plan would only cost the state $60 million in the first year with a smaller loss the second year. He said he could make state government more efficient to make up for the lost revenue.
"My whole plan is designed to bring in more tax revenue at lower tax rates," Smith said. "The potential loss in revenue is assuming the economic base wouldn’t expand."
Smith said he would be willing to stop phasing in the tax cuts if they failed over time to increase state revenue through economic growth.
"It’s nothing but campaign rhetoric to say you’re going to lower those things until you know what you’re going to cut," Democratic gubernatorial candidate Jackie Cilley said of proposals to cut business taxes.
Cilley said she agrees the state needs to cut the business profits tax, but she would wait to see what tax changes New Hampshire residents will support rather than make campaign promises like Lamontagne and Smith have done. She said businesses needs good roads and bridges and an educated workforce to grow.
"They want to start the discussion with taxes. I want to start it with a vision for the state," she said.
Cilley’s chief Democratic rival, Maggie Hassan, also has stressed the need to support education to boost job growth.
Hassan said business owners are telling her they need skilled workers. She proposes investing in New Hampshire’s colleges and asking them in return to freeze tuition and increase the number of admission slots for state residents.
"I am focused on workforce development," she said.