Let’s talk about a way to provide the ingredients for continued economic growth for NH. The current operating budget calls for a reduction in business taxes. However, the most significant problems for New Hampshire businesses are high energy costs and an insufficient supply of energy. Without looking at the problems in their entirety, we do not solve the problems. Today’s industry demands reasonable cost and a predictable and sustainable supply of energy. We must face this issue head on if we are to survive in the 21st century economy.
The most significant change in tax policy for the state of New Hampshire came when Walter Peterson was governor. The inventory tax was phased out and replaced by the business profits tax. This major change in tax policy was brought about as a result of a commission put together by then Governor Peterson to look at tax reform. This tax was good for New Hampshire then, and with the business enterprise tax formulated when Steven Merrill was governor, represents almost 30 percent of the tax revenue produced for the state.
One of the concerns with the operating budget passed by the Committee of Conference is the reduction of business taxes and how this will affect the economy. I was a member of the Business Tax Study Commission that made its report about a year ago. One conclusion of the Commission was that the business profits tax rate is not a primary factor when a business is considering whether to expand or locate here; rather energy costs, an educated workforce, infrastructure and real estate costs are more important considerations.
The action taken by the Conference Committee reduces both the business profits tax and the business enterprise tax, but does not take into consideration the real stimulus that the economy needs. We are undergoing a period of gradual economic growth. We are emerging from the most severe recession we have had since the 1920s. While growth is progressing, at this point in time, energy supply and affordability are the main ingredients required to stimulate the economy.
The growth of our economy is dependent on an ample supply of energy at a reasonable cost. If this is not addressed, regardless of what is done with taxes, the ability for strong economic growth is not possible. Energy costs drive the economy. In addition, we must educate our labor force and produce educated men and women who will fill the jobs created by our economic growth. When this problem is solved, we can then look at taxes.
The legislature is considering a plan where energy generating capacity will be sold off by one of our current generating utilities. This action must be considered part of an overall plan to bring a sufficient supply of power at a reasonable cost into our state. Once we have achieved this, we will witness strong economic growth with more businesses expanding in New Hampshire and new businesses considering locating in the Granite State.
I have received numerous complaints from businesses throughout the state who are very concerned about energy costs and a competent work force. To reduce taxes without addressing these concerns will do nothing to enhance economic growth. When the Peterson tax change was made, it was done after extensive study and input from all involved. This was not the case with the current tax reductions, and as a result, the big picture was not taken into account.
Energy costs are key to attracting new business into our state and retaining the manufacturing that we have now. There are no simple solutions to this complex problem. Simply talking about reducing the tax rate without looking at the entire picture is inconsistent with good public policy. I would suggest that solving the problem in its entirety is the right answer to providing for prolonged economic growth for our state and our country. Simple solutions done in haste never really work.
Sen. Lou D’Allesandro is from Manchester and has represented the people of District 20 for nine terms. For the 2015-2016 legislative session he is Vice Chairman of the Ways & Means Committee and sits on the Finance and Capital Budget Committees. You can reach Sen. D’Allensandro at email@example.com