Taxes in Review

As the year rolls to its inevitable end, time has come to look at the legislative events in Concord.  Space is limited so we can not discuss each of the 40 (yes, 40) or so fee or tax increases piled upon the residents of New Hampshire by the current majority party.  Of course this is on top of nearly 30 fee or tax increases from the last biennium.   The state’s budget increase 17.5% in the last session and increased 10%+ in the midst of, to use the President’s term “the worst economic recession since the Great Depression.”  This is just what virtually every economist warns against, increasing taxes in an economic downturn.

Since we can not discuss individually the 40 or so fee or tax increases passed by the radicals in the majority let us consider just one as an example of the process followed.  Perhaps the so-called LLC Tax best demonstrates the transparency, or lack thereof, and the total disregard for the welfare of the people of New Hampshire demonstrated by the current liberal majority.

The LLC tax law was passed, literally (not figuratively), in the middle of the night with no public presence except a tired reporter.  This new and untried tax was created in a desperate attempt to balance a totally unbalanced budget.  It was hidden in HB-2 the "trailer," i.e. the implementation bill for the budget, HB-1.  THERE WAS NO PUBLIC HEARING ON THIS TAX!  Well, so much for openness and transparency in a Democratic administration! 

LLCs in New Hampshire account for perhaps the largest number of employees in the state.  It is the LLC that hires your son or daughter during the summer.  It is an LLC that our children form to engage in their career paths in many instances.  The tax on "middle-class" workers; plumbers, electricians, massage therapists, hair stylists or barbers, chiropractors, dentists, landscapers, single person law firms, small rental property operators, postal center operators, your local restaurant or bar and yes, private investigators actually amounts to 13.5% according the David Hess of the House Republican Office and the Senate Minority Leader.  Just who do you think is going to pay the tax?  No business pays a tax; the tax is paid by you and me.  This midnight tax just increases the cost of getting the lawn mowed or morning coffee.

Wait, I hear a question, the law says it is “only” a 5% tax.  Yes, the law says is only a 5% tax on profits.  That means the state is now requiring every small business to figure your profit & loss.  Very few one or two person small businesses spends the hundreds or thousands of dollars per year needed to have their CPA prepare a P&L statement.  Of course, that is in addition to the money needed to get the federal tax 1040 completed.

Once the profits have been defined you are required to pay the existing 8.5% (exceptionally high in the nation) Business Profits Tax (BPT).  Then you are required to pay the 5% LLC tax.  Partnerships and similar business entities are also subject to this excessive taxation.  Regular corporations are subject to either the BPT or the payroll tax (the Business Enterprise Tax (BET)). 

What, you don’t have a formal P&L prepared for every year since you became an LLC.  You better get cracking, this middle of the night secret law allows the DRA (Department of Revenue Administration) to "reach back" (in socialist countries that is called a retrospective tax (c.f. NH Constitution Part the First, Article 23)).  Remember the law took effect July 1, 2009 but the DRA says they can go back forever to collect taxes.

Wait, you have a solution, just pay yourself the profits and take them annually as pay.  Sorry the state says that may not be possible.  The state (Big Brother, Metropolis, The Farmer, the all-powerful state by whatever name) will determine what you should be paid.  Yes, that is correct, the state, not you, will determine what “reasonable compensation” is.  I am of a sufficient age to remember that the Soviet Union set the wages for all occupations.  That worked out really well didn’t it?  But then again, no socialist entity has long existed. 

If you would like a look at the rules for this new tax do not look to your New Hampshire Legislator for a copy.  This law has a neat feature of tying the taxing rate not to what New Hampshire legislators write into law, but what the bureaucrats (not the congressperson, but the civil service wonks) running Washington write into IRS rules.  Of course that little thing called representative taxation found in Part the First, Article 28 of the New Hampshire Constitution has no affect whatsoever on the rights of the residents of New Hampshire.

This one new egregious and blatantly unfair and likely unconstitutional tax is an example of how the radicals in Concord are treating you and me.  Bills are passed with little or no notice.  Bills are passed with little or no public input.  Disregard for rational and commonsensical solutions is rampant.  There is exaggerated spending year after year.  There is no analysis of the consequences of actions because of a “good intent” or because “it feels good” to undertake and action. 

Then again we were assured there would be "hope" for a new tomorrow and promised definite "change."  I guess that the hope is that the feds and the state will not take all of your earnings and the change is literally what is left in you pocket after taxes.

There are some people in the House who consistently vote for the rights of people to earn a living.  It is a task to meet the challenges constantly thrown at businesses, individuals and honored social conventions by the radical elite now in power in Concord.  Check the voting record of the Representative and Senator serving your community.  The votes are on-line.  The Republicans took advantage of House rules to demand a role call vote on nearly every spending, taxing, fee increasing and social issue.

So this is what the last year of radical left-wing politics has wrought; fewer jobs and decreasing appeal of New Hampshire as a place to do business.  What will the next session bring is the question.  Until November arrives, we few can only try to slow and delay the onslaught of taxes and increased spending and lack of openness in government.

Jordan G. Ulery

Member 161st   New Hampshire General Court – House

Ways and Means Committee

Republican - Hillsborough 27