Call me old fashioned, but I think a promise made should be a promise kept.
The Meals and Rooms Tax is that extra charge on the bottom of your restaurant bill added by the state. It also applies to hotel rooms and other parts of New Hampshire’s hospitality industry. Over the years, the tax has crept up from 6% to 8% to its current level of 9%. Lawmakers succeeded in raising the tax rate in large part due to the promise to share 40% of the revenues the tax generated with cities and towns — that might allow cities and towns to put those extra revenues towards property tax relief.
But the Legislature hasn’t been great at keeping that promise, and routinely kept more than 60% of M&R revenues for the state budget. In 1993, the Legislature made another promise; to catch up on the lost revenue sharing arrangement by dedicating 75% of any increase in total revenues back to towns, up to $5 million a year.
This promise, too, has been broken. In fact, in 10 of the last 12 years, the Legislature has put a provision in the state budget that suspends the revenue sharing increase. Revenue sharing has fallen so far behind the promised level that even if we increase it by $5 million every year, projections done by the New Hampshire Municipal Association show that the local share of the Meals and Rooms Tax would never catch up to the promised level of 40%.
Republicans and Democrats alike have decided that the state needed the money to make the budget balance, and that cities and towns hoping to use promised revenue to lower property taxes would have to wait until next year.
I think they have waited long enough, so I have introduced legislation to not only restore the catch-up clause in the revenue sharing agreement but increase it to $10 million per year. If Meals and Rooms Tax revenues were to increase by 4% per year, we would get back to the promised 60%-40% split in 15 years. That’s a conservative estimate. If New Hampshire’s hospitality industry were to grow faster than that we could restore the balance even sooner.
This is a fiscally responsible way for the state to start keeping its promises to local taxpayers. I would like to get back to 40% immediately, but I recognize that this is going to be a tight budget year. Allowing cities and towns to keep the lion’s share of annual increases in Meals and Rooms Tax revenues will provide tax relief to homeowners and businesses facing high local property taxes. Additionally, it will offer relief from future increases in revenues, leaving existing funds to cover the state budget.
As a state Senator, I have made a promise to look out for the constituents in my district and for our great state as a whole. My revenue sharing plan protects state taxpayers while helping local taxpayers. That’s the spirit of the revenue sharing promise the Legislature made so many years ago.
This op-ed appeared in the Union Leader on Janudary 17, 2021.