By Rob Roper
The New Hampshire Union Leader recently posted an editorial about their Legislature’s 2015 decision to cut taxes on New Hampshire businesses. The tax cuts are still in the process of being phased in, but when fully implemented, the Business Profits Tax will be reduced by nearly 12 percent, and the Business Enterprise Tax by 33 percent.
When these tax cuts passed, the article reports, “State House Democrats warned that shaving the state’s high tax rates slightly would ‘blow a hole in the budget.’”
According to the Department of Administrative Services’s monthly revenue report, general and education fund revenues were $5.5 million ahead of the budget plan adopted earlier this year thanks to the state’s two main business taxes generating more revenue than anticipated. For the year to date, revenues are $11 million, or 1.6 percent, ahead of schedule [emphasis added].
This is important to mention for two reasons. First, there is the general lesson to be learned that when you reduce the barriers (such as cost) to doing business, you get more activity that generates more revenue. And, when you increase those costs you get less of both.
The second is the fact the New Hampshire, which we are all well aware has no income or sales taxes, is taking steps to make their business climate even more competitive. And it’s working.
Let’s hope Vermont’s Legislature considers both of these lessons as they debate things like $15 minimum wage, a new payroll tax to cover the cost of a government-run Paid Family Leave insurance program, and a Carbon Tax.
Rob Roper is president of the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.
3 thoughts on “New Hampshire lowers taxes, raises revenue”
Good for New Hampshire. Unfortunately the tax cuts in Kansas didn’t work at all, and put their economy in the tank.
Don’t throw the baby out with the bathwater.
The Kansas tax cuts have had familiar political criticisms – not to mention the state’s unique susceptibility to falling energy and agriculture prices over the last half dozen years or so. None the less, the story bias depends on the author. And its not unreasonable to assume that the consequences of falling energy and agriculture prices may have made the Kansas economy much worse had it not been for the tax cuts.
Consider this interview Kansas Governor Brownback.
The Kansas ‘experiment’ does provide one important lesson with regard to the possibility of making a poorly written aspect tax reform.
For example, “University of Kansas men’s basketball coach Bill Self made headlines in 2016 when it emerged he had used a loophole in the 2012 Kansas tax cuts to avoid paying state taxes on 80 percent of his salary.” Apparently, he filed articles of incorporation for a limited liability company when the law changed and signed a contract extension with the University of Kansas that paid him $230,000 per year—and his LLC $2.75 million. This loophole has since been eliminated and, hopefully, will not exist in the new federal tax reforms.
The rest of the story……
Indeed, Mr. Roper is correct: when taxes decrease, tax revenues increase. It happened when JFK was president and when Ronald Reagan was president. As the adage goes, ‘20% of something is more than 35% of nothing’.
And businesses are already anticipating the benefits of a federal tax cut. Consider this headline.
Feds Collect Record Taxes Through November
Unfortunately, there’s more to the story. The ‘cnsnews’ headline says this in its entirety.
Feds Collect Record Taxes Through November; Still Run $201.8B Deficit
It happened with JFK and RR too. Only for a couple of years under Clinton, primarily because of the ill-fated dot.com boom (later a bust) and the so-called ‘Contract with America’ pushed by Newt Gingrich, did tax revenues surpass spending for a net surplus.
Revenue is never been the problem. Spending is. And, because Vermont’s legislature and political appointees (especially in Health, Education and Welfare) are notorious for spending more without doing their due diligence, I fear the result of increasing tax revenues. The only way to put a limit on government is to stop feeding it.
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