Starting in 2015, legislators began to trim New Hampshire’s very high business tax rates to make the state more economically competitive. Ever since, politicians and political activists have debated the effects of these reductions.
Unfortunately, the debate hasn’t been heavy on actual data.
At the Josiah Bartlett Center for Public Policy, we’ve tracked changes in state revenues and spending to see how the business tax cuts have affected both sides of the balance sheet. The numbers tell the true story, even as too many politicians and activists tell an entirely different one.
Throughout this seven-year effort to improve New Hampshire’s economic competitiveness, opponents of low taxes made five core arguments against the cuts. From reducing state revenue to decimating public school funding, they predicted that government revenue would fall, services would be reduced, and businesses would shoulder a lower share of the cost of state services.
All of these predictions have been wrong. In reality, the opposite occurred. State business tax revenues more than doubled, aid to local governments and public schools increased, and the share of state revenues paid by businesses soared.
Our new briefing paper, “Five Myths About NH’s Business Tax Cuts,” uses official state data to show how political narratives, not facts, continue to drive the conversation about this issue. The five myths, along with the actual data, are outlined below.
Revenues
From 2015-2022, legislators cut the Business Profits Tax by 12% and the Business Enterprise Tax by 26%. Opponents claimed from the start that the cuts would reduce revenues. Many still claim this. In fact, revenues grew significantly.
State Comprehensive Annual Financial Reports from fiscal years 2015-2023 show that business tax revenue soared from $561.7 million in FY 2015 to $1.2 billion in FY 2023. That’s a 124% increase.
Businesses “paying their fair share”
Opponents claim that businesses no longer “pay their fair share” of the cost of government since rates were cut. In fact, the share of state tax revenues paid by businesses has risen by 56%.
In 2015, businesses paid 25% of state General and Education Trust Fund revenues. In 2023, they paid 39%.
Even when including the entire state budget, federal revenues and all, the share funded by business taxes rose from 11% to 15.4%.
How could businesses shoulder a larger share of the state budget as their tax rates fell? Increased business formation and increased profitability.
The number of businesses in good standing registered with the state increased from 160,000 in 2015 to 188,000 in 2022, the last year for which the Department of Revenue Administration has posted complete data. That’s a 17.5% increase.
The number of businesses filing a tax return rose by 3,174, or 4.4%, while the number making a business tax payment rose by 5,401, or 12.4%.
So from 2015-2022, more businesses were formed, and more of those businesses were profitable. That economic activity boosted business tax revenues.
Aid to local governments
The business tax cuts are alleged to have reduced state aid to local governments. But the state Office of Legislative Budget Assistant publishes a 10-year chart of local aid, and it shows local aid increasing by $214 million, or 19%, from 2015-2025.
Aid to public schools
The business tax cuts are also alleged to have prompted higher property taxes by reducing state aid to local public schools. But state aid to public schools increased by 15% from 2015 to 2025.
At the same time, public school enrollment fell by 16,373 students, or 9%. With state aid increasing but enrollment declining the average per-pupil aid to public schools rose from $5,115 in 2015 to $6,469 in 2024. That’s a 26% increase.
Revenues and the 2025 state budget
The newest criticism is that business tax cuts are responsible for projected revenue shortfalls in Fiscal Year 2025. This also is untrue.
Total General and Education Trust Fund revenues are $1 billion (46%) higher in FY 2024 than they were in FY 2015. The state has literally never taken in so much money. (This excludes federal grants and aid.)
However, since 2015 legislators have regularly increased spending to match revenues. Had spending simply grown at the rate of inflation, rather than the rate of revenue growth, a leveling off of state revenues this year would not be a concern.
Nine years ago, four Northeastern states — Massachusetts, Rhode Island, New York and Maryland — had top corporate tax rates lower than New Hampshire’s. This year, only two — New York and Rhode Island — do.
Legislators set out in 2015 to make New Hampshire more economically competitive, and they succeeded. At the same time, state revenues surged, the share of state revenues paid by businesses rose to nearly 40%, and those revenues funded increases in state aid to local governments.
That’s the real record. As lawmakers debate the best way forward in 2025, these facts should drive that discussion.
Andrew Cline is president of the Josiah Bartlett Center for Public Policy.
