Gov. Kelly Ayotte addresses reporters in her office, Jan. 15, 2025 (Ethan DeWitt | New Hampshire Bulletin)
Gov. Kelly Ayotte appears to be moving ahead with a two-year budget that does not include further cuts to New Hampshire’s business taxes, despite some Republicans’ wishes.
“Our budget proposal will be based on the revenue structure we have today,” Ayotte said at a press gaggle in her office Wednesday.
The comments came as House Majority Leader Jason Osborne, an Auburn Republican, has co-sponsored a bill with other top House Republicans to reduce the business enterprise tax. That tax applies to all compensation, dividends, and interest paid by a business. It is currently a 0.55 percent tax; Osborne’s bill, House Bill 155, would lower it to 0.5 percent.
Lawmakers have reduced New Hampshire’s two business taxes continuously since 2015. The state’s business enterprise tax was lowered from 0.75 percent to 0.55 percent, while the business profits tax was dropped from 8.5 percent to 7.5 percent.
Of the two taxes, the business profits tax produces far more revenue. In state fiscal year 2024, which ran from July 2023 to June 2024, the state took in $209.5 million from the business enterprise tax and about $1 billion from the business profits tax, according to the Department of Revenue Administration. The business profits tax haul made up just under half of the state’s overall $2.2 billion revenue in that year.
In the past decade, Republicans have pushed for business tax cuts, arguing it will make New Hampshire more attractive to businesses from surrounding states and that the resulting economic activity will keep state revenues high. Democrats have opposed them, countering that businesses do not need them and that state programs will suffer from lower funding in the long run.
After recent years in which the business profits and business enterprise taxes brought in higher revenue sums than anticipated, the taxes are now underperforming expectations, leading Ayotte and other Republicans to call for reductions to state spending. Reducing the business enterprise tax could also result in lower revenues, opponents say.
Even while suggesting the tax cuts won’t appear in her proposed budget, Ayotte didn’t rule out the proposed tax cut Wednesday.
“The New Hampshire way is really to align our revenues with what’s coming in and what’s going out,” she said. “I’ll look at every single bill and look at whether it makes fiscal sense for the state of New Hampshire, and I’m always going to be looking to make sure that we’re returning as much money as we can to taxpayers.”
Also on Wednesday, Ayotte suggested that while she supports the goal of universal education freedom accounts – a proposal that would see the voucher-like program extended to families of all income levels – she might not push for them to be made universal right away. Instead, Ayotte appeared to entertain a more gradual approach in which the program is expanded to families with higher incomes in steps.
In her inaugural speech Jan. 9, Ayotte vowed to find general cost reductions in state government, a message she repeated Wednesday. Without giving details, she said she has been working with state commissioners to try to find areas to reduce as she finishes her budget.
“If you look at over the last biennium and before that, but particularly look at the last biennium, there was a fairly robust increase in spending and general fund dollars in that,” she said. “So I look at this as: We really do have to recalibrate.”
The governor, who has held her position for about a week, is due to present her draft budget to the House and Senate in February. She said Wednesday she will be using a baseline budget crafted by her predecessor, former Gov. Chris Sununu, in the final months of his administration, and building from there.
Lawmakers will then assume the budget writing process.