Hotels and restaurants don't want a hike in the rooms and meals tax. Businesses don't want a suspension of the Business Enterprise Tax credit. Those with valuable investment (yes, those people do still exist) don't want a 5 percent capital gains tax. Many people don't want expanded gambling as they say the social ills would be high and the gains not as high as advertised.
So where is the necessary middle ground in a proposed $11.6 billion budget that needs hundreds of millions of dollars in additional revenue? Right now it's too soon to say, but one thing is painfully clear. The time is over for requests to Do No Harm, a mantra coming from many in the business community for months now. A more realistic approach now is to ponder how to do the least harm.
That is what legislators are now trying to do. A Senate Finance Committee plan to suspend the Business Enterprise tax credit for two years was decreased to one year in the final bill passed by the Senate. In the House, a 5 percent tax on capital gains is similar to federal law and exempts $500,000 of home sales per couple. Additionally, an 8 percent inheritance tax approved by the House exempts the first $2 million and does not apply to spouses.
Many people could and have argued that those concessions don't make up for the pain the individual measures cause. The wide discrepancy in the House and Senate budget proposals are testament to the gap of defining doing the least harm. A Senate press release on the budget states: The Senate's two-year budget includes a wide variety of small fee increases, expanded gambling and an adjustment to a business tax credit in the second year to make up for the drop in traditional sources of revenue.
That adjustment to the business tax credit has been a hot topic among executives statewide, and expanded gambling-along with the estimated $200 in revenue it will bring-is a contentious issue that as been suggested and rejected many times in Concord.
Gov. John Lynch has never been a vocal fan of gambling, and his team-like the House and Senate negotiators-is hunkered down considering other options to fill the budget gap. One of those options reportedly under discussion by Lynch and his team is taxing distributions from limited liability companies (LLC) as dividends. The Business and Industry Association of NH was no fan of that one, sending out a press release last week expressing strong concerns regarding rumors related to that proposal.
There is no magic answer. There is also a real possibility that whatever legislators do will not be enough. Budgets lay out expenditures based on expected revenues. Revenues have been far below projections for many months now. Who can be certain that any compromise reached in Concord won't end up being short three or four months down the road? That's something for everyone to consider as they ask themselves that critical question: How can the budget do the least harm to their wallets and the most good for the state?
Published Friday Jun 12, 2009