NH revenue growth will slow in 2023

May 11 – CONCORD – The record amount of state taxes and fees exceeding forecasts this year is unlikely to continue into 2023, Revenue Commissioner Lindsey Stepp told the House Ways and Means Committee on Tuesday.

Soaring inflation, rising interest rates, labor shortages, soaring fuel prices, supply chain shortages and lack of affordable housing are expected to combine to produce slightly less revenue next year, she said.

“We’ve been waiting for this impending recession for years now,” Stepp said. “I think it’s happening, and it’s really a matter of when.”

The DRA chief provided the House Tax Drafting Committee with revised estimates for major taxes administered by his agency. This includes the two state taxes on businesses, taxes on hotel room rentals and restaurant meals, real estate transfers, tobacco, communication services, and interest and dividends.

Either way, Stepp said his adjusted plan calls for slightly lower gross revenue from those taxes for the next fiscal year than the current one.

Stepp now expects the current year to end with those taxes producing $331 million or 17.6% more than expected.

For next year, Stepp’s forecast is that taxes will bring in another $268 million, or 14.6% more than the budget framers expected when they wrapped up the two-month spending plan. years in June 2021.

For those two years, that would mean $600 million in additional revenue.

Much of that is because while the COVID-19 pandemic has put a damper on some businesses, other businesses have thrived, she said.

“We anticipated that the impacts of COVID would lead to a recession,” Stepp said. “Obviously there were companies that did extremely well during COVID.”

Healthcare, tech and retail chains have all exceeded expectations during the pandemic, she said.

“We’ve done better than some states at the start of the pandemic. We have a tourism component to our economy, but I think our mix allows us to hold up better than other states,” Stepp said.

Business income tax refund problem

Former President and Rep. Susan Almy, D-Lebanon, said a year ago lawmakers on both sides feared Payroll Protection Program loans could lead to a record slew of business tax refunds from the country. ‘State.

Through April, the state has paid out $57 million in refunds, nearly 44% more than the $40 million in refunds at this time in 2022, Stepp said.

Tax refunds would be even higher, she said, but some business owners have chosen to defer those tax payments as a credit against future business tax bills.

Business tax growth by July 1 will be $230 million more than expected, and that drowned out business tax refunds as a factor, she added.

Self-funded insurance and alcohol agencies submitted separate reports on their own tax revenues.

Meanwhile, a new report from the Pew Charitable Trust found that only three states – Kentucky, California and Colorado – have increased their Rainy Day funds relative to state spending as much as New Hampshire in 2021.

The tight inventory of homes available for sale will slow the surge in property tax yields, Stepp said.

“We’re seeing fewer trades, but they’re happening at a much higher price,” Stepp said.

The median price of $440,000 for a house and $350,000 for a condo is out of reach for many working-class families, she said.

“I think it’s a bit of a ticking time bomb. At some point we’re going to see a decrease (in taxes). People won’t be able to afford those prices,” Stepp said.

She says this tax will generate 3% less next year.

The menthol ban in Mass. was a godsend for NH

New Hampshire got a huge boon when Massachusetts banned the sale of menthol and flavored cigarettes in December 2020.

But over the past year, tobacco taxes have returned to their traditional annual decline of 3 to 5 percent per year, Stepp said.

She said this decline will continue next year.

Late last month, the Biden administration proposed banning the sale of menthol cigarettes nationwide.

If that continues, Stepp said he shouldn’t start in New Hampshire until Jan. 1, 2024.

Conversely, the state got $48 million this year, or $10 million more than expected, thanks to the tobacco settlement New Hampshire reached with major cigarette manufacturers in 1998.

State’s Attorney Warren Cormack said inflation, tobacco company profits and the volume of cigarettes sold produced the unexpected gain.

“It feels like the perfect storm of those three factors all combining to give us another $10 million,” House Ways and Means Vice President Patrick Abrami told R-Stratham.

“We will take it.”