January 2, 2009
NH Business Review
David Juvet, senior vice president of the Business and Industry Association of New Hampshire, best summed up the stance of many business groups awaiting the start of the 2009 legislative session: “First, do no harm.”
While the economy is at the forefront of businesspeople’s minds, the state of the state budget can’t be too far behind. With a budget deficit of $250 million and growing – the hands of business groups around the state are placed in a firmly protective position over their wallets. “Frankly, we are playing defense this year,” said Juvet. “We are in a severe recession, and it’s never been tougher for business.”
Let the record show that nobody has proposed increasing business taxes – the business profits or business enterprise tax — or taxes that would affect business, like the rooms and meals tax. But that isn’t making business groups breathe any easier.
“I don’t think anyone wants that as a first option, but after all the various plans go down, and it’s the 11th hour and the 59th minute, it will be the last thing standing, so everybody will hold their noses and vote for it,” said Juvet.
Would lawmakers even dare raise taxes in this economic climate? N.H. Sen. Lou D’Allesandro, who chairs the Senate Finance Committee, thinks that they can’t. If his favorite revenue source – increased gambling – doesn’t pass, the state will just have to cut into the bone of the budget, he said.
While he does support a gas tax hike to alleviate the highway fund, he opposes any tax increase for the general operating budget.
“We are not going to increase revenue,” he said. “It will be more than belt-tightening. This is much worse than people realize.”
But House Finance Committee Chair Marjorie Smith – while also pledging to find major ways to cut the budget, particularly in corrections and health care — takes nearly an opposite position. Given the current state of the economy, gambling isn’t a reliable way to raise money, she said, and the recent bankruptcy filing of the Hinsdale race track seem to underline her point.
Still, she said, the state won’t be able to balance its budget through belt-tightening alone.
“We are going to have to look at everything (in terms of cutting spending),” she said. “But no matter how hard we look, we are going to need additional revenue.”
The budget and the economy is such a big issue, even health care — always near the top of the agenda for businesses — has been relegated to the back burner.
“It is all going to be budget, all going to be money,” said Bob Nash, president of Independent Insurance Agents and Brokers of New Hampshire.
But while the budget battle looms large, it won’t be all-encompassing. There will be more debate over issues closely related to the budget, such as reforming the retirement system and providing school funding, with an obligatory stab at another constitutional amendment targeting educational aid.
Some proposals will be watched by retailers (fighting organized theft and the sale of liquor in grocery stories), utilities (the Regional Greenhouse Gas Initiative and expansion of electric transmission lines), contractors (wetlands regulation and new requirements on developers and home improvement contractor regulations), landlords (possible increases in lead, radon and mold regulation and tenants doing their own weatherization), health-care practitioners (medical malpractice reform) and just about anyone who hires workers (family leave, unemployment and workers’ compensation legislation).
For a list of titles of bills affecting business, their sponsors and further explanation of them, visit nhbr.com.
Gas tax increase?
Meanwhile, here is a look at two promising – if that’s the word — tax increases that might be coming your way.
The gas tax seems the exception to the rule these days — an acceptable form of revenue, now that the price of gas has tumbled from $4 a gallon to $1.50. With the highway fund so depleted, the 10-year highway plan stretched into the next generation and some 150 state bridges on the red list, the consensus is that there is no alternative but to raise the tax.
Yet the expected big-ticket federal stimulus package might call into the question that consensus. The Department of Transportation showed a draft $200 million wish list of road projects that are “shovel ready” and another $300 million for commuter rail, a near requirement to be part of the mix in an energy-conscious Obama presidency.
The road projects represent a year of federal grants. But what would be the state match requirements? If a state match is required, it might give more impetus for a gas tax. On the other hand, if the state match requirements are diminished, the federal aid might substitute for raising the tax.
Finally, a sharp spurt upward in gas prices might make taxing gasoline politically unfeasible.
How much the 18-cent-a-gallon tax should be increased is anybody’s guess. David Campbell, D-Merrimack, vice chair of the House Public Works and Transportation Committee would like to nearly double it over three years, adding a nickel a year, bringing it up to the 30-cent-per-gallon national average.
“If we don’t raise the gas tax, we would have to make cuts, the towns would lose road aid, and the property tax will go up,” said Campbell.
Rep. Gene Anderson, R-Lebanon, has a different idea: tie the increase to the consumer price index. Once upon a time it made sense to keep the gas tax constant. As people drove more, revenue increased. But people have been driving less, and road and bridge maintenance costs have less to do with driver wear and tear than with the ravages of weather, salt and inflation.
Anderson’s proposal won’t mean much revenue in the short run. In the last few months the CPI has gone down, not up. In a separate bill, Anderson would also like to see some of the money going to alternative “highway-related transit systems,” like buses and park and ride.
This raises another debate. The gas tax can’t be used for rail, according to state Supreme Court ruling, but what about the money from the stimulus package?
The DOT’s inclusion of $300 million for a Manchester-to-Nashua commuter rail line is a windfall rail advocates could only dream of last year. But several key lawmakers said that if New Hampshire had any choice in the matter, it should spend all of the stimulus money on roads.
“The bridges just have to be done. Rail, it can’t pay for itself,” said Rep. Gene Chandler, R-Bartlett, a former speaker who once chaired the Public Works Committee.
“It (rail) is what we need to do in the long term, but I don’t see that as an immediate priority,” said Sen. Harold Janeway, D-Webster, who chairs the Senate Capital Budget Committee. “If the money was available only for that, I wouldn’t turn up my nose at it though.”
Revenue might also come from an ODD source, the Oil Discharge and Disposal cleanup fund, a small tax imposed on fuel distributors now earmarked for cleaning up underground storage tanks.
Last year the House passed a fraction of a penny increase to shore up the depleted fund, only to have the measured killed as prices rose last spring.
But now Public Works Committee Chair Candace Bouchard is wondering if the state should continue to support the fund at all. The DES has already required that most gas stations upgrade their underground tanks with doubled-lined ones that presumably won’t leak. And she added that most service stations are corporately owned by their suppliers, so instead of a fund to help the little guy, “are we just subsidizing big oil?”
She has a bill in on the subject, which would either do away the surcharge or divert the money to the general fund.
Beer tax next?
In the past, the state has used the cigarette tax as its go-go revenue source. Last year, lawmakers upped it a quarter if revenues didn’t reach $50 million by a certain date, which they didn’t. Merchants had barely forked that money over on Dec. 15 when new hikes were being considered.
Next session, it may be the beer tax’s turn in the spotlight. Rep. Jessie Osborne, D-Concord, is proposing a 10-cent increase in the tax, to 40 cents a gallon.
Osborne also is a sponsor of an income tax proposal, long confined to purgatory by both parties. Osborne’s income tax has some larger personal exemptions and a homestead exemption on the statewide property tax, so that those earning under $40,000 with a home worth less than $200,000 would pay nothing. It also would include an 8 percent cap on any tax increase, special exemptions for business, elimination of the interest and dividends tax and the business enterprise tax and a one-percent decrease in the business profits tax.
However when Osborne gets calls from lobbyists, it’s about her beer tax. The dime, said, would go to substance abuse programs, now in danger of severe cutbacks. That translates into only a couple of pennies a bottle, she emphasized.
“We are in the business of alcohol, so we should be taking care of people addicted or to prevent them from getting there,” said Osborn. The costs, she said, aren’t just social. “Our county jails are flooded with people due to substance abuse and it’s busting the county budgets.”
Some lobbyists have whispered veiled threats that a beer tax would cause InBev, the recent Belgian buyer of Anheuser-Busch, to shut down its Merrimack plant, or at least reduce its workforce, in retaliation.
Osborne doubts whether a tax increase in a small state would result in such an action – and, besides, “a foreign company has no business telling us how to raise money.”
A more public objection is the effect such a tax increase would have on convenience stores along the state borders.
“If you’re raising taxes in this economy, you are going to hurt cross-border sales even more,” said John Dumais, president of the New Hampshire Grocers Association.
Dumais has an alternative revenue-raiser up his sleeve. His organization is lining up behind State Liquor Commission Chairman Mark Bodi’s plan to sell sprits at supermarkets and convenience stores.
Nearly half of state liquor store sales are from out-of-state consumers, but the stores aren’t open evenings and never on Sunday.
“If you are busy, and you can’t get any spirits by 5 p.m. on Saturday night, you are still dry for the rest of the weekend,” said Dumais. “It’s a missed opportunity to satisfy the cross-border customer.”
The plan is to treat sprits like wine. Instead of being taxed at the distribution level, the state buys them and marks them up. The state would sell them to the stores at a lower mark-up, so that grocery stores would be able to make a margin. But all those details have to be worked out in legislation, as would limits on the quantity or variety.
“We don’t want to split the baby and kill the incentive,” said Dumais.