By Christian Wade and Sarah Downey

New Hampshire Gov. Chris Sununu proposed a series of across-the-board tax cuts as part of his two-year budget proposal, unveiled Thursday.

Sununu called for cutting the state rooms and meals tax from 9% to 8.5 % – the lowest level in more than a decade – and reducing the business enterprise tax from 0.6% to 0.55% and raising the filing threshold to $250,000 to provide relief for businesses and help spur the state’s economic recovery.

The Republican governor also called for phasing out the state’s interest and dividends tax over the next five years, fully repealing it by 2026.

“These common sense tax reductions will allow our small businesses to reinvest their dollars into their employees and their communities,” Sununu said in his third annual budget address, which was live-streamed from the state Capitol. “After such a tumultuous and uncertain year, now is not the time to be raising taxes on the people of our state and small businesses, and that’s why we’re cutting them.”

New Hampshire Gov. Chris Sununu

The proposal calls for boosting the state’s reserve or ‘rainy day’ fund by $300 over the next two years, while increasing local governments’ share of rooms and meals tax revenue by $15 million a year. He said the increased local aid is the first in a decade, and aimed at offsetting rising local property taxes that are largely out of the state’s control.

“We’re downshifting cash to municipalities, not costs,” Sununu said. “We’re keeping our commitments to cities and towns by providing millions in additional revenue sharing.”

Sununu says the state’s projected shortfall at the end of the state’s biennial budget period, which begins July 1, has been whittled down from $350 million to $50 million.

He credited his administration’s “fiscally responsible management” for helping the state’s economy to survive the economic fallout of the coronavirus pandemic.

“Unlike other states across the country, which are now raising taxes on businesses, taxing out-of-state workers, or enacting draconian budget cuts to cover their massive deficits, New Hampshire managed to mitigate the worst financial impacts of the pandemic — without raising taxes,” Sununu said.

The preliminary budget plan includes several new proposals such as a proposed merger of New Hampshire’s two-year and four-year public college systems and the creation of a state Department of Energy.

Sununu said he plans to refile a proposal to provide up to $10 million to reduce student debt for college grads who choose to remain in the state to work after graduation. He filed a similar proposal in the previous two-year budget but Democratic-controlled Legislature didn’t include his plan in the final version of the budget.

“The Democrats removed that from the budget but I am not giving up,” he said. “This historic investment in New Hampshire’s workforce will attract more job creators and talent to the state.”

In 2019, Sununu vetoed a budget plan approved by the Democratic-controlled Legislature that boosted spending over his initial proposal. But control over the House and Senate swung back to Republican control in the November elections.

The governor also said the budget plans include a proposal for a “voluntary” paid family and medical leave act that he reiterated “can and must be done without an income tax.”

Reaction to the governor’s spending proposal drew mixed reactions on Thursday.

Democrats said Sununu’s plans to cut business taxes would hurt the state’s economy and shift more of the burden to property owners.

“We cannot afford to have more business tax cuts made to big corporations at the expense of Granite State property taxpayers,” Sen. Lou D’Allesandro, D-Manchester, said in a statement.

Stealing a phrase from Sununu’s address, Sen. Cindy Rosenwald, D-Nashua, said lawmakers want to ensure that the state’s COVID-19 recovery costs are “not downshifted” to property owners, renters, businesses and self-employed workers.

“Now is not the time to offer more protections and tax cuts to out-of-state corporations,” she said. “Now is the time to make meaningful changes that put money back into the pockets of property tax payers.”

But Sununu’s pledges to cut business taxes and keep state government costs down won him immediate praise from conservative pro-business groups.

“Reducing the tax burden on small businesses, employers, retirees, and those planning their financial futures are the pro-growth reforms that will help our economy recover stronger,” Greg Moore, state director of Americans for Prosperity-New Hampshire, said in a statement. “We have seen the success of allowing businesses and individuals to keep more of what they earn.”

The budget now moves to the state Legislature, which will craft its own spending package.

New Hampshire lawmakers consider decrease in business taxation

As New Hampshire looks to advance economic recovery from the impact of the COVID-19 pandemic, a new bill seeks to continue a tax reduction plan for businesses.

SB 13, which is sponsored by Senate President Chuck Morse, R-Salem, would decrease the business profits tax (BPT) from 7.7 percent to 7.5 percent, and the business enterprise tax (BET) from 0.675 percent to 0.5 percent.

While the business profits tax largely applies to the relatively few multinational corporations operating in New Hampshire, the business enterprise tax affects roughly 90 percent of the state’s thousands of small businesses, Bruce Berke, New Hampshire state director at the National Federation of Independent Business, told The Center Square.

“It’s really important that the BET reduction move forward,” Berke said. “It began through legislation passed by Gov. [Maggie] Hassan in 2015 and was continued by Gov. [Chris] Sununu.

“The reductions were stalled during the budget debate in 2019, and then due to revenue amounts during COVID, so this picks up where we were and really allows the BET to be reduced at the same rate as the BPT.”

The BPT has 20 percent to go to get to its planned reduction. With Republicans in the majority in the Statehouse again, the momentum appears to be in its favor, though opposition is expected.

“The average business pays more in property taxes than state business taxes. Twice as much more,” Rep. Susan Almy, D-Lebanon, former chairwoman of the House Ways and Means committee, told the Concord Monitor.

The measure has been heard by the House Ways and Means committee and a vote could be on the agenda.

“I think the key takeaway is the state of New Hampshire has always been the beacon of reasonable business regulation and taxation in the Northeast, and these actions further reflect that,” Berke said.