By John Toole
---- — CONCORD — New Hampshire ranked eighth among states for business tax climate in the Tax Foundation’s annual report released last week.
The state slipped from No. 7, but remained the best in New England — and far ahead of its neighbor Massachusetts at No. 25.
“This report once again underscores that New Hampshire continues to be the best state in the region and one of the best states in the nation for doing business,” said Marc Goldberg, a spokesman for Gov. Maggie Hassan.
But some in the Granite State remain troubled by the state’s business tax policy.
Dig into the Tax Foundation analysis and the numbers show New Hampshire at No. 48 for corporate taxes, No. 46 for unemployment taxes and No. 42 for property taxes.
What keeps the state highly rated overall for business climate in the Tax Foundation study is the lack of sales and personal income taxes, though it does tax interest and dividends.
David Juvet, who follows tax policy for the Business and Industry Association, said the foundation scores New Hampshire pretty low in some components.
The state’s business profits tax, among the highest in the nation at 8.5 percent, and the business enterprise tax that is unique to the state, are reasons why, he said.
“I think everybody wishes our taxes were lower,” Juvet said.
The BIA’s president, Jim Roche, this summer publicly warned state leaders New Hampshire is at a fork in the road.
“One road leads New Hampshire toward becoming just another expensive, business-hostile, northeastern U.S. state,” Roche told them.
The other road would let New Hampshire stand alone in the region as a place where manufacturers and technology companies thrive, creating jobs and stimulating the economy, Roche said.
Greg Moore, state director of Americans For Prosperity, said the state’s low ranking for corporate taxes is a worry.
“This dubious ranking should be a wakeup call to every state elected official who says that they are concerned about creating jobs in New Hampshire,” Moore said.
Mass. does better with corporate taxes
New Hampshire may top Massachusetts in overall business tax climate, but the corporate tax component remains a difference maker, in Moore’s view.
He points out that while New Hampshire is No. 48, Massachusetts ranked No. 34.
“This is why when you hear about a company saying that they are moving to Massachusetts because they have a lower tax rate, you scratch your head, but it happens to be true,” Moore said.
The state has had a commission on business taxes for several years. It is meeting this fall and may recommend changes to the Legislature.
Earlier this year, the Legislature adopted its recommendation for expanding the research-and-development tax credit to businesses, a move the governor supported.
The commission is looking at how well that is working, as well as at the business enterprise tax, tax credits generally and how New Hampshire tax regulations match up with federal ones.
The commission’s chairman, Joel Olbricht, president of the Olbricht Storniolo accounting firm in Hampstead, said it will ask companies to testify this fall about their reasons for choosing New Hampshire or other states to do business.
Gun maker Sturm Ruger, which recently decided to expand in North Carolina instead of New Hampshire, will be one of the companies.
“It’s not all about the corporate income tax,” Olbricht said.
The commission has already heard that companies value a highly trained workforce, the state’s proximity to Boston and the Seacoast, as well as the Manchester-Boston Regional Airport, he said.
The state’s regulatory atmosphere also matters, Olbricht said.
“New Hampshire is a small enough state that when the president of the company calls the governor or commissioner of a department, he can get a callback the same day,” he said.
It’s more than tax policy
Olbricht sees more than tax policy in the commission’s work.
“Our commission is more about jobs and economic development,” he said.
The commission is due to expire next year, but Olbricht said the Legislature has extended its life once and could do so again.
He said one value to the commission is that it has put lawmakers, attorneys, business representatives and tax professionals in the same room to look at policy.
Rep. David Hess, R-Hooksett, is one of the commissioners.
He said the commission isn’t just looking at types of taxes, but ways to make the system more efficient and filing less costly.
Hess agrees the work is about economic benefits for the state.
“What changes will make us more competitive,” he said.
Hess acknowledges the commission’s focus on tax policy and what matters for commerce.
“How important is the business tax structure to business thinking about how to expand and where to locate?” he asked.
“We’re trying to get a handle on whether business taxes are a significant factor in a business deciding to expand or locate here,” Hess said.
Thus far commissioners are hearing other factors may matter more, including utility costs and the labor environment, he said.
Executive Councilor Chris Pappas, who represents Londonderry, previously served on the commission. He agrees there is room for improving state tax policy.
“When you look at the rates of our business taxes, we are definitely on the high end,” Pappas said.
But the state maintains advantages that aid business and economic development, he said.
“New Hampshire performs well on quality of life, transportation and proximity to the labor force,” Pappas said.
Hassan understands “the New Hampshire advantage” includes a low-tax environment as well as a highly educated workforce and overall quality of life, Goldberg said.
“Gov. Hassan will continue to work closely with the business community to ensure that state government is responsive to their needs,” Goldberg said.
Jeff McLynch, executive director of the New Hampshire Fiscal Policy Institute, said business tax studies imply they affect economic growth, but academic studies contradict that notion.
“They have little effect on business investment decisions,” McLynch said.
Education, infrastructure, job training are considerations that matter more to businesses, he said.
Discussion of business tax changes inevitably leads to talk about what happens to services those taxes help fund.
McLynch said policymakers have to consider how they are going to pay for services with less revenue, if business taxes are reduced or eliminated.
“You really want to look at this in a complete way,” McLynch said. “There are all sorts of tradeoffs that go into this.”
Hess said commissioners are ever mindful of the effects on revenue.
“The commission is very cognizant of the potential consquences of any revenue change,” he said. “Any recommendations we make have to take into account revenue consequences.”