Two business taxes would be eliminated, another would more than double and another tax would be halved under a business tax overhaul plan being proposed by Republican gubernatorial candidate Andrew Hemingway.
Hemingway said his tax overhaul would reduce the overall complexity of the state’s business taxes, spur job creation, flatten tax rates to the 2-percent level and also place a tax on consumption rather than investment.
“We have a higher corporate tax rate than Massachusetts. How can they take us seriously?” Hemingway said in an interview with the New Hampshire Union Leader explaining his plan. “We have an obvious business climate problem here.”
Hemingway said his tax structure would be revenue neutral. The restructuring would:
• eliminate the 8 1/2 percent Business Profits Tax. The tax is expected to generate $276 million to state government this year, the single largest in-state revenue source for state government;
• eliminate the 5 1/2 percent Medicaid Enhancement Tax. The tax is expected to bring in $72.2 million this year.
• cut the 5 percent Interest and Dividends Tax rate to 2.3 percent. The tax is expected to generate $96.1 million this year;
• and restructure the Business Enterprise Tax, a 0.75 percent levy that businesses now pay on payrolls, interest payments and profits. The tax is expected to generate $73.6 million in state revenues this year. The rate of the newly named Business Flat Tax would more than double — to 2 percent — and it would extend to non-profit organizations and even government agencies.
Hemingway is in a GOP primary with Walt Havenstein, a former corporate CEO.
Havenstein spokesman Henry Goodwin said Havenstein is in the final stages of developing a vision to regain the New Hampshire advantage that will address taxes, economic growth and job creation.
He said Hemingway is only guessing at how much revenue the restructuring will generate.
Goodwin said Hemingway’s plan calls for increasing a tax on payrolls. That would hurt small business just so big companies could avoid a tax on their profits, he said.
“Worst of all, his plan is a tax on jobs. By adding to the wage bill for small companies, he is tying the hands of our job creators,” Goodwin said.
Hemingway said his plan would help small business. It exempts the first $200,000 of business revenue. It would also allow for instant depreciation of large capital investments. And it would simplify taxes.
By taxing non-profits and government, it eliminates an economic advantage they have in the labor market, Hemingway said.
“There’s a disparate advantage non-profits and government have in hiring labor. Private enterprise pays a tax for employees that they do not,” he said.
Hemingway said the cut in interest-and-dividends tax will appeal to angel investors, who will be apt to invest more in business and hire more workers.
“In order to make New Hampshire more competitive both nationally and globally, we must restructure our tax rates,” he said.
Hemingway noted that CNBC recently ranked New Hampshire 30th among the states for business friendliness.
However, taxes aren’t the biggest problem on the minds of business lately. During recent roundtable discussions, business owners spoke mostly about workforce issues, particularly the availability of workers and whether they are properly educated, said David Juvet, senior vice president at the New Hampshire Business and Industry Association.
Larger companies spoke about taxes, but taxes fell into a second tier of issues, which included health care and regulations, he said.
Hemingway said businesses have had to cut back on training programs because of tax burdens.