The Business Tax Rate Cut Is Dead. New Hampshire Republicans Passed a Smaller Deal Instead.

Independent New Hampshire Journalism · Northfield, NH

House Republicans wanted to cut the Business Enterprise Tax for every company. Their own Senate called that too risky — so what Gov. Kelly Ayotte signed into law is a filing break for small firms and a rate cut walled off behind a surplus that isn’t coming.

The tax cut that House Republicans called a top economic priority for 2026 did not survive contact with their own Senate. As introduced, House Bill 155 would have cut New Hampshire’s Business Enterprise Tax for every company that pays it, from 0.55 percent to 0.50 percent. What both chambers passed on June 4, and Governor Kelly Ayotte signed on July 10, does something narrower: it lifts an estimated 4,500 small businesses out of the tax entirely, and it locks any actual rate cut behind a business tax surplus of at least $100 million, which revenue was nowhere close to producing when the bill passed.

Strip away the press releases and the shape of the deal is plain. A Republican House passed a straight rate cut. A Republican Senate killed it as too expensive in a down year. The compromise both sides handed a Republican governor keeps a real break for the smallest filers while shelving the rate cut that was the whole selling point. For most New Hampshire businesses, and for the local property taxpayers who cover whatever Concord gives away, that difference is the story.

What HB 155 set out to do

The Business Enterprise Tax is New Hampshire’s payroll tax under a different name. Since 1993 the state has taxed the “enterprise value tax base” of every qualifying business — its payroll, plus the interest and dividends it pays out — whether or not the company earns a dime in profit. It is unusual enough that no other state runs one quite like it. Businesses can credit what they owe in BET against the state’s 7.5 percent Business Profits Tax and carry unused credit forward for a decade, so the two levies are wired together in the budget. The current rate is 0.55 percent, the floor of a phased reduction from 0.75 percent in 2015, a drop of about 27 percent over ten years.

Sponsor Joe Sweeney, a Salem Republican and deputy House majority leader, wanted to take the rate to 0.50 percent. “I was elected to cut taxes,” he said after the Senate balked. The House backed him. On January 8, members voted 189 to 165 to send the cut to the Senate, with every Democrat opposed and a bloc of Republicans crossing the aisle. Business lobbies lined up behind it. The National Federation of Independent Business and Americans for Prosperity both pressed for the cut, casting the BET as a tax on hiring itself; the federation pegged its savings to employers at roughly $46 million over three years. Proponents point to the Tax Foundation, which ranks New Hampshire third best overall for taxes but only 37th for its business tax system in particular, the gap they want to close.

A Republican Senate said no

The math changed when the bill reached the Senate Ways and Means Committee. Its chairman, Tim Lang, a Sanbornton Republican whose district covers part of the Lakes Region, read the revenue numbers and called an across-the-board cut “a fiscally imprudent thing to do.” Senators from both parties agreed it was too risky, pointing to committee estimates that a full rate cut could drain about $25 million in 2029 and roughly $50 million a year after that.

The numbers behind that caution were not subtle. Three months into fiscal year 2026, business tax revenue was running 10.4 percent below the Legislature’s own plan and 8.8 percent below the year before, according to a September snapshot from the Department of Administrative Services. Broader collections told the same story: through October, taxes and fees came in about $30 million under forecast and nearly $60 million below the prior year. The state had already pulled money out of its Rainy Day Fund. Rather than cut the rate, Lang’s committee moved to raise the income threshold at which a business owes the BET at all — relief aimed at the small end, not the whole field.

What passed instead

Sweeney did not fold; he vowed to attach a tax-cut amendment to every committee of conference he sat on. The negotiators split the difference, and the version that cleared both chambers on June 4 carries two moving parts.

First, it raises the BET filing threshold from about $298,000 in gross receipts or enterprise value to $400,000. That lifts an estimated 4,500 small businesses out of the tax entirely, by supporters’ count — a genuine cut in paperwork and cost for the smallest filers.

Second, it revives Sweeney’s rate cut, but only as a contingency. Under the new RSA 77-E:2-a, the rate drops 0.05 points for each full $100 million by which combined Business Enterprise and Business Profits Tax revenue beats the budget in a fiscal year, as certified by the Legislative Budget Assistant. No cut takes effect if the Rainy Day Fund is below its statutory cap, if general and education trust fund revenue falls short of plan, or if business tax revenue is lower than the year before; a surplus blocked by those conditions carries forward to the next year that meets them. The law will not take the rate below 0.25 percent. Because business tax revenue was running below plan when the bill passed, the earliest a cut could take effect is Jan. 1, 2028.

Ayotte, who told lawmakers in January 2025 that her budget would be “based on the revenue structure we have today” and that she was not interested in a BET rate cut, signed it on July 10, 2026. It is Chapter 280 of the 2026 laws. The filing threshold and the rate mechanism take effect Jan. 1, 2027, and the final bill also appropriates $2.5 million to the Department of Health and Human Services for nursing facility rates.

Who this helps, and how much

Here the sales pitch and the arithmetic part ways. Raising the filing threshold is real relief for a corner store or a two-person shop that no longer has to file. But the rate cut — the piece branded as making New Hampshire competitive — was never going to move the needle for those businesses, because they barely pay the tax now.

New Hampshire’s Business Enterprise Tax rate, from 0.75% in 2015 to 0.55% for taxable periods ending on or after Dec. 31, 2022. Chapter 280 (HB 155) cuts the rate 0.05 points for each full $100 million of certified business tax surplus, to a floor of 0.25%; the first cut could take effect Jan. 1, 2028, at the earliest. Sources: RSA 77-E; HB 155 (2026) committee-of-conference report; N.H. Department of Revenue Administration. Graphic: Granite State Report.

The New Hampshire Fiscal Policy Institute, a nonpartisan research group in Concord, ran the numbers on the original 0.05-point cut in January. The average BET-paying business would have saved about $565 a year, or roughly $47 a month. Set aside the 306 largest filers, each with more than $18 million in taxable payroll, and the average saving fell to about $28 a month. The study, by Research Director Phil Sletten, concluded that the proposed cut “does not appear likely to spur significant changes in private-sector economic activity,” and the institute’s executive director, Gene Martin, wrote that most businesses would get “savings too small to meaningfully boost hiring or investment.”

The reason is built into the tax. A flat percentage cut on a base made mostly of payroll returns the most dollars to the biggest payrolls. In tax year 2023 that base totaled an estimated $45.9 billion statewide, according to the institute. So a rate cut does little for the small employers it is sold to help, and plenty for the largest ones. That is arithmetic, not spin.

The revenue hole, and who fills it

The rate cut the institute studied would have cost the state more than $26 million a year. That would land on top of nearly $105 million in BET revenue the state was already set to forgo in fiscal 2026 alone because of earlier cuts; the institute puts the revenue lost to business tax rate cuts at about a billion dollars from 2016 to 2024. For scale, the institute said, $26 million is more than half of the previous year’s budget for the State Police, the New Hampshire Veterans Home, or the state’s road and bridge aid to cities and towns.

Supporters have a counter, and it deserves a fair hearing: business tax revenue has climbed even as rates fell, up 118 percent from 2015 to 2024. The trouble is the comparison. Over the same years, business tax revenue rose 239 percent nationally and 224 percent across the rest of New England. New Hampshire cut its rates and still trailed the states that left theirs alone. The institute found no consistent link between BET rates and job growth across four decades, and the state’s own Commission to Study Business Taxes reached a similar verdict years ago.

The bill lands on your property tax

Business taxes make up about 39 percent of New Hampshire’s state revenue, the largest such share of any state in the country. When the state shrinks that pot, the obligations do not shrink with it. Schools still open, roads still need paving, and someone covers the gap. In New Hampshire that someone is usually the local property taxpayer.

Which is why the same June 4 session that passed HB 155 also passed HB 1300, signed July 15, 2026, as Chapter 324, putting a question on the 2026 and 2028 ballots asking voters whether to cap their own local school property taxes. Senate President Sharon Carson framed that measure as a matter of consent: “It gives the taxpayers the right to vote.” The Legislature spent the spring deciding it could not afford to cut the business tax rate, then wrote a mechanism to cut it later anyway and handed voters a property-tax cap to fight over in November. Those are three separate promises, each pitched to a different audience.

New Hampshire did not get a business tax cut in 2026 so much as a deferral with conditions attached. The small-filer exemption is worth something real. The rate cut is a message to the base, payable only when the books say yes. And the arithmetic from January still holds: shrinking a revenue source in a shortfall year does not make the cost disappear. It moves it, usually down the road, to a town meeting near you.

— Dexter Dow, Granite State Report

Fact check

Editor’s note. Sources for the factual claims above are listed in the fact-check table. The count of roughly 4,500 exempted businesses is supporters’ estimate. Some revenue estimates carry ranges depending on phase-in year. Bill text and status: N.H. General Court and LegiScan. Corrections: Granite State Report corrects verified errors promptly and appends a dated note identifying what changed and when. The corrections policy and the corrections register are public, and correction notes are never removed.