At a time when the state may face millions of dollars in flood cleanup costs, the Legislature is debating whether to cut revenue.
Lawmakers are gambling that cutting taxes for insurance companies will make the state a magnet for the industry.
New Hampshire Public Radio's Dan Gorenstein reports.
Can the state afford to risk 12 million dollars in general funds, hoping the move will both keep jobs and create new ones?
Supporters of a bill to cut the insurance premium tax say yes.
House and Senate negotiators have agreed on a plan to reduce the tax for all non-healthcare insurance companies from 2% to 1%.
The cut would be phased in over the next four years.
That means the state would lose about 12 million dollars a year in revenue once the phase-in is complete.
But George Roussos a lobbyists for insurance companies, believes the economic hit is worth it in the long run.
2:19 ...Right here in Concord, Life insurance company, then Jefferson Pilot, now part of the Lincoln Financial group, left NH almost entirely b/c of the premium tax. If we had been 1%...they would not have left.
Liberty Mutual Insurance Company owns Keene-based Peerless Insurance.
The company employs about 700 people.
In a written statement, the firm wrote the 2 percent tax rate "represents an impediment to the growth of Peerless Insurance...so much so that serious consideration has been given to moving...to a state with a more favorable insurance tax regime."
Admittedly, paying one penny for every dollar collected on a premium compared to two pennies sounds small.
But according to Peerless, that difference represents about 2.4 million dollars a year.
The threat of a large firm relocating certainly helped convince Senator Lou D'Allesandro that something had to be done.
3:50 I was concerned there would be more active environments outside the states...Peerless is the situation I was really concerned about....keeping them here is a very important issue. Liberty Mutual has constantly been expanding in this state, they are going to continue that expansion....I have been assured by them, A, Peerless will stay. And B, them increasing their workforce.
Supporters say the heart of the legislation is to attract new insurance companies to New Hampshire.
Already, one Maine firm has said it would strongly consider relocating if the state created a more insurance friendly atmosphere.
About 15 states have rates lower than New Hampshire's.
Reducing the tax to 1% would put New Hampshire among the top six.
Judging from the success other states have had in cutting the insurance premium, George Roussos says New Hampshire should be able to create a lot of new jobs.
2:59 you look at the map and no one on the East Coast, no one has lowered its tax to 1%. We've got CT. at 1.75%....but there are a whole lot of insurance companies that are located in the eastern part of the country and no one that has a rate that low. And so that will be a tremendous incentive, we hope, for companies to come to NH.
But Roussos admits, there is no guarantee that new jobs will come.
Peerless Insurance may or may not stay in the state.
A statement from Peerless's parent company, Liberty Mutual says it has no plans to relocate.
One study predicted that a change in the tax rate would bring in $63 million dollars and create 1600 jobs over a 3-5 year period.
But according to that same report, the state would have to add 900 more jobs just to replace the 12 million it currently receives from the premium tax.
A spokesperson for Governor Lynch says he hasn't decided whether he will support the bill.
For NHPR News, I'm DG.
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