New Hampshire gets good ranking, but picture is mixed on business taxes
Tax Foundation report gives state low marks for BPT, property and unemployment taxes
Despite low rankings for its business, unemployment and property taxes, New Hampshire ranks seventh in the nation – and tops in New England – in the Tax Foundation’s recently released State Business Climate Index.
New Hampshire had the same rank last year – though with a slightly lower overall score – despite the state cutting its business profits tax rate in the last year.
But the foundation’s index, released last week, gives income and sales taxes more weight, and the Granite State has neither, though it didn’t get a perfect score in those categories.
The foundation uses about 100 variables grouped into five categories to determine the rankings:
• Individual income tax: New Hampshire ranked ninth in the category. The state doesn’t have an income tax, of course, but it doesn’t don’t top the category because of its interest and dividends tax.
• Sales tax: New Hampshire ranked second in sales tax. New Hampshire doesn’t have a general sales tax, either, but it does have taxes on such things as cigarettes, gasoline, and beer. (The category doesn’t count the rooms and meals tax). So do most other state, and the Granite State’s taxes are competitive in most of these categories. (By the way, states like Massachusetts don’t get credit for having a tax holiday. Indeed, they are counted against a state, since tax holidays are a headache for retail businesses to administer.)
• Corporate tax: The state ranked 46th in this category. The BPT rate was 8.2 percent on July 1, 2016, the date on which the comparisons were made. The tax is currently at 7.9 percent and will go down to 7.5 percent. The state did climb up a notch from is 47th ranking in 2016. But the tax rate wasn’t the only thing that hurt the state. It also received poor marks for some of its tax policies. New Hampshire is one of the two states that limit carryforward of losses and it doesn’t have an alternative minimum tax for corporations, apparently a no-no. The state was given credit for its research and development tax. Luckily, the report doesn’t note that it is one of the few states that caps that deduction, though the cap was lifted from $2 million to $7 million last year. (Also, the report didn’t know what to do with the uniquely New Hampshire business enterprise tax, which taxes companies that don’t even make a profit on their wages, interest and dividends.)
• Property tax: In this category, the Granite State ranks at 43, the same as last year. But by some measures it moved closer to the bottom, with the third-highest property tax collections per capita ($2,690), behind New Jersey and Connecticut; and the second-worst rate (also behind New Jersey) as a percentage of personal income (5.32 percent).
• Unemployment insurance tax: New Hampshire ranks 41st in the category. The good news is that’s three notches above where it stood in 2016, which is partially due to a rate decrease reflecting the health of the unemployment trust fund. But the state is held back because it has “more complicated experience formulas, excludes fewer factors from the charging method, and has complicated their systems with add-ons and surtaxes.”
