Tale of two reports: good news, bad news

N.H. has a good tax climate, but inadequate rainy day fund


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New Hampshire has a great business tax climate, but does not enough have money in the bank to help it get through most recessions.

The former conclusion is the result of the Tax Foundation’s 2016 State Business Tax Climate Index, while the latter is based on a study out of George Mason University in Fairfax, Va.

According to the Tax Foundation, New Hampshire has the seventh-best tax climate in the country, based on data from the summer of 2015, a ranking it has held since 2012. (It’s the best such ranking in New England.) It earned that distinction despite it having the third worst corporate tax rate (behind Delaware and Iowa) and the sixth-highest unemployment tax rate, (Massachusetts and Rhode Island were higher) and seventh-highest property taxes (Massachusetts, Rhode Island and Vermont’s are higher.)

But the Granite State ranked second best for its lack of sales tax behind Delaware (because the sales tax survey also looks at gas, beer and tobacco taxes, which New Hampshire all has), ninth for its lack of an income tax (its ranking is lower than other income tax-free states because Granite State taxes interest and dividends). The lack of broader-based taxes apparently more than made up for the taxes aimed specifically at business.

The bad news, however, is that the state doesn’t have enough money in its rainy day fund to ride out most recessions without substantial budget cuts or tax increases, at least based on 2014 data analyzed by Mercatus Research in a report released Thursday.

The Arlington, Va.-based think tank looked at how hard recessions hit each state based on past experience (both in severity and duration). Based on the strength of its rainy day fund, ranks only 38th in the nation, right below Massachusetts and right above Maine. (Vermont ranks 11th).

But with the general fund taken into account, the Granite State ranks 21st in its ability to weather a recession, the best in New England. But, of course, dipping into the general fund means either cutting the budget or raising taxes.

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