Past reductions in the NH Business Enterprise Tax (BET) have lowered the revenue available for public services. Those rate reductions have not provided clear economic benefits, and a newly proposed rate reduction does not appear likely to spur significant changes in private-sector economic activity.
The proposed BET rate reduction, which would lower the BET from 0.55% to 0.5%, would generate very small tax savings for most companies. The BET rate started at 0.25% in 1993 and was at 0.75% from 2001 to 2015. Since then, there have been four rate reductions. Only a few of the largest companies would see their liabilities reduced enough to consider hiring another worker. However, if the rate reduction had been in full effect for the current state budget, BET revenue would likely have been more than $26 million lower per year in each year of the budget biennium.
That total is equivalent to more than half the state road and bridge aid sent to municipalities through the state budget in State Fiscal Year (SFY) 2025. This annual amount is also more than half the SFY 2025 budget of the NH Veterans Home, the Division of State Police, or the Bureau of Children’s Behavioral Health.
Among the 40,603 BET filers who had a tax liability in Tax Year 2023:
- Average BET tax base: $1.1 million
- Average reduction with reduced liability: $565.48
- Among the largest 306 filers:
- Average tax base: $61.5 million
- Average reduction with reduced liability: $30,737.17.
Analyses of corporate tax rate reductions do not indicate reducing state corporate tax rates is likely to increase revenue, or have a dramatic effect on economic activity overall.
Conversely, the lost revenue from a BET rate reduction at the state level could be significant. Policymakers just used $67.3 million from the State’s Rainy Day Fund to help cover costs that outpaced revenues and limited key services in the new state budget. Revenue reductions associated with a BET rate change would likely lead to further curtailment of public services for Granite Staters.
Written by Phil Sletten, research director at the NH Fiscal Policy Institute, a nonpartisan, independent research nonprofit that examines issues related to the State budget, economy, policy, and financial security. For more information, visit nhfpi.org.
