SB 99, the Meals and Rooms Tax and the Budget
by Granite State Taxpayers Secretary Dan McGuire
RSA 78-A specifies New Hampshire’s tax on restaurant meals, hotel rooms and car rentals.
Currently 9%, the House-passed budget for the next biennium (which starts July 1) reduces the tax to 8.5% as of October 1. The tax was first codified in 1967. It is the one of the most significant statewide taxes.
It brings in over $300 million per year.
In 1995 the legislature added a provision to distribute 40% of this revenue to cities and towns based on population.
This lasted until 2010. All state budgets since then have simply allocated fixed amounts to municipalities.
The latest budget had the amount at roughly 22%, or some $69 million.
Legislators are keenly aware, as are nearly all citizens, of our significant property tax burden, primarily the result of runaway school spending despite a declining school-age population. Municipal assistance like that in the meals and rooms tax is intended to mitigate property taxes, but some would argue it merely incentivizes local spending.
To further address this problem, the Senate unanimously passed Senate Bill 99.
SB 99 intended to restore the full 40% meals and rooms revenue sharing.
The bill was then tabled in the Senate and will presumably be part of the Senate’s version of the budget.
In our opinion, while its intentions are excellent, SB 99’s method is flawed.
There is nothing magical about the 40% number. It was implemented 25 years ago. Budgets should not run on autopilot. Clearly our current legislature has a better handle on today’s fiscal matters than anything passed in 1995.
If the state wants to lower property taxes, the best way is to simply cut the statewide property tax.
To their credit, that is exactly what the House did in their budget when they lowered the statewide property tax by $100 million. This change will directly benefit taxpayers’ property tax bills, rather than first getting filtered through the municipal budget process.
The Senate should follow the House’s lead.
Posted by GST Secretary Dan McGuire
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