N.H. business-tax ‘friendly,’ overall

With no sales or income taxes, New Hampshire has placed among the states in the country with the least burdensome business taxes. However, the picture is clouded by other financial hits against small businesses in the Granite State, according to a new national survey.

New Hampshire ranked seventh overall in the country in the 2010 State Business Tax Climate Index as rated by the Tax Foundation, a national policy research group that analyses government tax and fiscal activities.

The foundation rated the Granite State second best in the country for its lack of a sales tax and ninth for individual income tax — both ranks are the key reasons behind the state’s overall score.

However, South Dakota was named the most friendly state for business taxes followed by Wyoming, Alaska, Nevada, Florida, Montana, Delaware and Utah.

When foundation researchers included looked at New Hampshire’s corporate taxes themselves — the business profits tax and the business enterprise tax — the picture was the complete opposite — a score of 50, the worst in the country.

New Hampshire also didn’t fair so well with unemployment insurance taxes, ranking 39th, and property taxes, ranking 40th.

Other components that were measured were credits and deductions, such as job credits, other business tax base criteria, such as the “throw-back” rule or foreign tax deductability, selective excise taxes, like gas and cigarette taxes, and capital stock taxes.

For example, the report noted, “[w]hen companies have a higher net operating loss than they can deduct in one year, most states permit them to apply deductions to previous years’ returns or to future returns. … Only Pennsylvania and New Hampshire limit carry-forwards and as a result, these states score poorly in this variable,” said the researchers.

Regionally, however, New Hampshire was by far and away ranked more business-tax friendly than any other state in New England. Maine was New Hampshire’s next closest competitor, with an overall rank of 34th in the country, followed by Massachusetts, 36th; Connecticut, 38th; Vermont, 41st; and Rhode Island, 44th.

New Jersey was ranked 50th as the least business-tax friendly state, followed by New York, 49th, and California, 48th.

A copy of the report may be downloaded at www.taxfoundation.org. — CINDY KIBBE/NEW HAMPSHIRE BUSINESS REVIEW

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