HB564: decreasing the rate of the business enterprise tax.

HB 564-FN-A – AS INTRODUCED

2007 SESSION

07-0970

09/04

HOUSE BILL 564-FN-A

AN ACT decreasing the rate of the business enterprise tax.

SPONSORS: Rep. Renzullo, Hills 27; Rep. Itse, Rock 9; Rep. Hopfgarten, Rock 5; Rep. Ulery, Hills 27

COMMITTEE: Ways and Means

ANALYSIS

This bill decreases the rate of the business enterprise tax.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

07-0970

09/04

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Seven

AN ACT decreasing the rate of the business enterprise tax.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Purpose. The legislature finds that it is an established rule of economics that decreasing the rate of a state business tax has a growth stimulus effect on the state’s economy, which results in an increase in overall revenue generated by the tax. The purposes of this act are to stimulate business and job growth in New Hampshire and to increase state revenues, by decreasing the rate of the business enterprise tax from of one percent to of one percent.

2 Business Enterprise Tax; Rate Decreased. Amend RSA 77-E:2 to read as follows:

77-E:2 Imposition of Tax. A tax is imposed at the rate of [3/4] 1/2 of one percent upon the taxable enterprise value tax base of every business enterprise.

3 Effective Date. This act shall take effect July 1, 2007.

LBAO

07-0970

01/26/07

HB 564-FN-A - FISCAL NOTE

AN ACT decreasing the rate of the business enterprise tax.

FISCAL IMPACT:

The Department of Revenue Administration states this bill will decrease state revenue by $65,290,419 in FY 2008, $57,518,669 in FY 2009, $49,746,919 in FY 2010 and each year thereafter. There is no fiscal impact on county and local revenue or state, county, or local expenditures.

METHODOLOGY:

The Department of Revenue Administration states this bill will decrease the rate of the business enterprise tax (BET) from of one percent to of one percent. The Department uses a FY 2007 BET revenue estimate of $242,501,756. The Department calculated a BET value base of $32,333,567,467 using the BET rate of $0.0075 ($242,501,756 / $0.0075). Using the same value base with a BET rate of $0.005, FY 2008 estimated revenues would be $161,667,837 or a decrease in BET revenue of $80,833,919.

The Department assumes an increase in the Business Profits Tax (BPT) due to a reduction of the BET credit available to offset the BPT. The Department used $93,261,000 (the BET paid and applied against the BPT for tax year 2005) to calculate a BET value base of $12,434,800,000 ($93,261,000 / $0.0075). Using the same value base with a BET rate of $0.005, the BET paid and applied to the BPT would be $62,174,000 in FY 2008 ($12,434,800,000 * $0.005), a potential increase in BPT revenue of $31,087,000 ($93,261,000 - $62,174,000). However, the Department states that due to carryover provisions of the BET, only 50 percent of the BPT reduction would be realized in FY 2008, 75 percent in FY 2009, and 100 percent in FY 2010 and each year thereafter.

FY 2008

FY 2009

FY 2010

FY 2011

BET Revenue Decrease

($80,833,919)

($80,833,919)

($80,833,919)

($80,833,919)

BPT Revenue Increase

$15,543,500

$23,315,250

$31,087,000

$31,087,000

Net Change Revenue

($65,290,419)

($57,518,669)

($49,746,919)

($49,746,919)

Changes to the BET will reduce both general fund and education trust fund revenues.