New Hampshire this year slipped ahead of Texas to claim the No. 6 spot on a national index of state tax competitiveness published by the Tax Foundation.

Formerly the Business Tax Climate Index, the newly redesigned 2025 State Tax Competitiveness Index combines the Tax Foundation’s indexes for corporate, individual income, sales, property and unemployment insurance taxes. 

New Hampshire ranked No. 1 on sales taxes, 12 on individual income taxes, 27 on unemployment insurance taxes, 32 on corporate taxes and 39 on property taxes. 

That was good enough to place New Hampshire sixth overall, behind perennial top-five states Wyoming, South Dakota, Alaska, Florida and Montana. 

Texas, previously in the sixth spot, fell to seventh, with New Hampshire edging up one spot by a fraction of a point.

(The foundation applied its new methodology to previous studies going back to 2020 so states could compare their progress.)

Texas ranked No. 1 on individual income taxes, but was in the bottom half on all other taxes. New Hampshire’s only personal income tax—the Interest & Dividends Tax—is scheduled to expire at the end of this year. 

Wyoming and South Dakota, the top two states for years, tied as usual for No. 1 on both corporate and individual income taxes.

Florida (with which New Hampshire competes for residents, workers and retirees) also tied for No. 1 in individual income taxes. It ranked No. 10 in unemployment insurance taxes, 14 in sales taxes, 16 in corporate taxes, and 21 in property taxes.  

The Tax Foundation praised New Hampshire lawmakers for voting in 2023 to let businesses fully deduct interest expenses in the year incurred, rather than over time.

“This change, following on the heels of rate reductions to New Hampshire’s two business taxes, helped New Hampshire’s corporate component ranking improve by eight places, from 40th to 32nd,” the report noted. 

New Hampshire was dinged for high property and corporate taxes.

The report noted that the Interest & Dividends Tax rate change from 4% to 3% did not alter this year’s ranking because the state was already so competitive. But eliminating the tax is seen as a positive step.

“New Hampshire will officially join the ranks of the individual income tax-free states once its low-rate interest and dividends (I&D) tax is eliminated in January 2025, further solidifying its competitive standing overall,” according to the report.

To improve New Hampshire’s tax competitiveness, the Tax Foundation recommends “eliminating the I&D tax…adopting permanent full expensing” and improving the state’s treatment of net operating loss carry forward,” all things legislators have tried to address in recent years.

Among his many memorable contributions to American arts, the great singer-songwriter Kris Kristofferson, who passed away in September, wrote one of the most quotable lines in rock history.

“Freedom’s just another word for nothing left to lose.”

It’s a fabulous drifter anthem. 

It’s also entirely wrong. 

Part of the American political left at the time was infused with a hippie ethos that disdained possessions and social connections. Freedom to them meant getting “back to the garden,” to quote another anthem of the era. 

They should’ve read fewer radical poets and more Enlightenment philosophers.

Ancient humans had “nothing left to lose” in the sense that they had few possessions. Life was a pretty big thing to lose, though, and life in a state of nature was not exactly full of lattes and free health care. If you were lucky enough to survive childhood, you still had to escape war, pestilence, famine, all the Old Testament stuff.  You were only free until someone more powerful came along and subjugated you. And then there were no U.S. Marines to come to the rescue.  

For most of human history, either chaos or subjugation was the rule for most of humanity. Humans spent millennia poor and unfree. 

The development of democratic governments along with institutions that decentralized power and incentivized innovation and upward mobility changed everything. 

When humans replaced extractive institutions dominated by elites for inclusive institutions that empowered outsiders, as MIT economist Daron Acemoglu concisely frames it, an unprecedented era of human flourishing began.

In 1820, 75% of the world’s population lived in extreme poverty, as the chart below from Our World In Data shows. By 2018, only 11% did. 

“For most of human history, life expectancy has been short – perhaps 25 years for our hunter-gatherer ancestors and only 37 years for residents of England in 1700,” a paper by Harvard, Princeton and UCLA researchers in 2011 determined. “Dramatic changes began in the 18th century, with life expectancy in England rising to 41 years by 1820, 50 years by the early 20th century, and 77 years today.”

In the past 13 years, life expectancy in England has risen to 80.

Economic growth more than tripled human life expectancy and has nearly eradicated extreme poverty.

“Economic growth made it possible to leave the widespread extreme poverty of the past behind,” Oxford University professor Max Roser writes. “It made the difference between a society in which the majority were lacking even the most basic goods and services – food, decent housing and clothes, healthcare, public infrastructure and transport – and a society in which these products are widely available.”

What economist Dierdre McCloskey calls “the great enrichment” was driven by a surge in economic growth, but what drives economic growth? 

Acemoglu notes that short bursts of economic growth have occurred under authoritarian regimes throughout history. But, like the people, they were short-lived. Why?

“Authoritarian systems often rely on some amount of repression, because they seek to maintain an unequal distribution of political power and economic benefits. They also adopt economic institutions and policies that protect incumbents and create rents for those who hold political power,” he wrote in his epilogue to Introduction to Modern Economic Growth.

He found that “a distinguishing feature of growth under authoritarian institutions is that it protects the interests of the current elite. So in the final analysis, growth must always rely on existing techniques and production relationships. It will not unleash the process of creative destruction and the entry of new talent and new businesses necessary to carry a nation to the state of sustained growth.”

The entry of new talent and new business (and new ideas) is crucial for raising living standards and for maximizing individual autonomy (freedom). 

Institutions and policies that seek to protect insiders by suppressing competition, innovation and freedom of individual action hurt economic growth by curtailing freedom and thus limiting opportunity for outsiders. 

Democracy alone does not protect against such collusion by insiders. Even in democratic regimes, special interests pressure ruling authorities for protections against outsiders. 

Such protections remain woven into American and New Hampshire laws even today. 

From tariffs and confiscatory tax rates at the national level to occupational and business regulations at the state level to housing restrictions and food truck bans at the local level, regulation and taxation continue to slow economic growth and reduce opportunities for average folks. 

Building an inclusive, prosperous society requires reducing the barriers that insiders erect to protect their own power and status from being challenged by outsiders. 

When insiders collude with government to extract resources from an unfavored group or to protect favored groups from competition or innovation, freedom, opportunity and prosperity are diminished.

The Josiah Bartlett Center for Public Policy advocates for expanding free markets and limiting government coercion because these are proven methods of maximizing freedom, opportunity and prosperity for all Granite Staters. 

Government maximizes freedom not by redistributing wealth after its creation, but by supporting institutions and policies that lift restraints on individual economic autonomy, thus empowering all citizens regardless of social, political or economic status to pursue happiness on their own terms (providing they don’t harm others). 

Such inclusive institutions maximize individual freedom, incentivize innovation and stimulate growth and prosperity. 

Free markets and limited, inclusive government generate maximum amounts of widely shared prosperity by unleashing the full measure of human potential.

It’s no accident that the “live free or die” state is rated No. 1 in economic freedom in North America and has the nation’s lowest poverty rate. 

It’s no accident that New Hampshire has enjoyed historically higher economic growth than Vermont or Maine, and thus has higher household and per-capita income, despite sharing similar geographic and demographic characteristics. 

Free markets and limited, inclusive government make everyone freer and more prosperous.

Freedom is the foundation of sustainable prosperity.

Or to put it another way, freedom’s just another word for everything to lose.

Lose freedom, and all of our modern prosperity collapses.

Acemoglu documents this collapse in numerous authoritarian regimes of the past. People would win a little freedom, which would cause a spurt of growth, which challenged established elites, who responded by restricting freedom, which ended the growth.

From the Mayans to the Romans to the Soviets, the cycle was repeated.

Lose freedom, lose prosperity.

That’s why the Josiah Bartlett Center fights for policies that expand economic freedom. 

If you’d like to help us raise living standards and create greater opportunities for all Granite Staters, you can make a contribution online here. It’s an investment in a freer, more prosperous New Hampshire for everyone.

Travis Fisher and Josh Loucks of the Cato Institute this week used New England’s reliance on imported natural gas to show how bad U.S. energy policies hurt Americans. It’s so dumb, the only explanation is “government.”

“Just north of Boston in Everett, Massachusetts sits the poster child for irrational energy permitting in the United States. The Everett Marine Terminal is a facility that connects imported liquefied natural gas (LNG)—often from Trinidad, more than 2,200 miles away—to natural gas delivery networks in New England. This is an absurd outcome for at least three reasons:

  1. New England demands natural gas, which generated 55 percent of the electricity on the New England power grid in 2023 and heats about half of the homes in Massachusetts,
  2. Abundant natural gas resources are being developed nearby. However, states like New York can abuse environmental statutes like the Clean Water Act to block any new pipeline that would move shale gas to New England. The Marcellus shale gas play (the most productive formation in the country) extends through Pennsylvania into New York, which shares a long border with Massachusetts, and
  3. Even if no new pipelines were built through New York state from Pennsylvania to Massachusetts, several American LNG export terminals (in Maryland, Georgia, Louisiana, and Texas) could supply New England if not for arcane laws like the Jones Act. As my Cato colleague Colin Grabow explains, the Jones Act “restricts domestic shipping to vessels that are US-flagged, built, owned, and crewed,” which effectively bans LNG shipments between US ports.”

Yes, New England imports natural gas from thousands of miles across the Atlantic because state and federal policies make it so difficult to move it from places like Pennsylvania, Texas or Louisiana to New England.

Sometimes it’s cheaper and more efficient to import products from far away rather than produce them at home. That is not the case here. The foreign imports are a result of government prohibitions or restrictions on domestic imports.

That’s just one of many results of dumb energy policies created by politicians intent on preventing markets from working. For more harmful policies, read the whole piece here.

Former Arizona Gov. Doug Ducey headlines the Josiah Bartlett Center’s 2024 Libertas Award Dinner on Sat., Oct. 5, honoring N.H. entrepreneur and philanthropist Peter T. Paul.

Join us and many of the state’s top business and political leaders in Concord as we celebrate the amazing accomplishments of Gov. Ducey and Peter Paul, two champions of free enterprise.

We’ll start with a reception featuring fine hors d’oeuvres and a cash bar from 6-7, followed by a filet mignon dinner as we gather to toast the New Hampshire Advantage and one of its foremost business leaders. We’ll have a few fun, surprise auction items as well, which you won’t want to miss!

About Gov. Doug Ducey:

As Arizona governor, Doug Ducey successfully championed numerous historic policy initiatives, prompting the Associated Press to write that he “reshaped the state.” He cut spending to erase an inherited budget deficit of more than $1 billion. He enacted the country’s lowest flat tax, lifted unnecessary licensing requirements that made it harder for Arizonans to work, eliminated or improved more than 3,365 regulations (the equivalent of a $183 million tax cut), pioneered universal school choice for Arizona families, required students to pass a civics test for high school graduation, and managed to increase public school teacher pay. Because of his insistence on pursuing free-market, pro-growth policies, Arizona’s economy thrived. When he left office, the state government had 5,000 fewer employees and the state had 500,000 more people employed in the private sector. Columnist George Will called Ducey the “most successful 21st century governor.” Gov. Ducey currently serves as CEO of Citizens for Free Enterprise, a national political and issue advocacy organizations dedicated to promoting and protecting free enterprise.

About Peter T. Paul:

Born and raised in Troy, N.H., Peter T. Paul graduated from UNH in 1967 with a B.S. in business administration, then got his MBA from BU. He is founder and president of Headlands Asset Management LLC, owner and chairman of Peter Paul Wines in San Rafael, Calif., and president of West Biofuels. He also founded and serves as chairman of The Headlands Foundation, a non-profit organization that focuses on making life better for children and their families. Mr. Paul founded Headlands Mortgage Company in 1986, growing it into one of the nation’s premier wholesale lending institutions. His generous giving includes exceptional support for UNH, which in 2013 rechristened its business school the Peter T. Paul College of Business and Economics. Mr. Paul is a recipient of the Ernst and Young 1999 Financial Services Entrepreneur of the Year award. He received an alumni award for distinguished service from The Graduate School of Management at Boston University in May 2003 and the first annual Achievement in Business Award from the Whittemore School of Business and Economics at University of New Hampshire, in April of 2008.

About the Libertas Award Dinner:

Date: Sat., Oct. 5, 2024

Time: 6-8 p.m.

Location: Grappone Conference Center, Concord, N.H.

 

For information about sponsorships, contact Drew Cline at [email protected].

Purchase tickets on our Eventbrite page by clicking the button below.

 

 

 

The West’s top musical acts all play Los Angeles (population 3.8 million), one of the world’s great concert cities. Legendary singer Van Morrison scheduled his new U.S. tour to start there in October—two nights at the famous Orpheum Theater, Oct. 19th and 20th. But then some guys from New Hampshire called him.

Morrison’s tour schedule had him flying to L.A. from England, where he is set to perform at the 1,700-seat Brighton Dome on Sept. 27th and 28th. The enterprising team behind Jimmy’s on Congress, a hot young jazz club in Portsmouth and one of the best music venues on the Eastern Seaboard (really), spied an opportunity. According to New Hampshire Business Review (NHBR), they reached out to Van Morrison’s team to see if he could stop in Portsmouth for a pair of shows on his way to L.A.

This is a little like the Toledo Mud Hens asking the Los Angeles Dodgers to stop for a three-game series on their way to New York. Van Morrison plays in large theaters that seat thousands. Jimmy’s is a night club that seats 312, mostly at tables and the bar (where the cocktails are great).

It was a plan so crazy it just might work.

The booker at Jimmy’s told NHBR that Van Morrison’s team said he could do it on one condition, NHBR reported. The club had to make some tickets available through Ticketmaster’s dynamic pricing system. 

The old-fashioned way of selling concert tickets is to use a fixed price. That’s the number that used to be printed on paper tickets (remember those?). Anyone who tried to get tickets to hot shows in the 1970s and ‘80s can tell you the problems with that system. You had to go wait in long lines at the venue (or try to get through on the phone), and the top shows would sell out quickly, with no way to find second-hand tickets other than answering a newspaper classified ad that you hoped was real, knowing a guy who knew a guy who knew a guy whose girlfriend couldn’t go that night, or traveling to the venue the night of the show in the hope that someone would sell you a ticket on the street. 

Today’s technology lets anyone anywhere have a chance at buying tickets online, which obviously has its own drawbacks, most notably quick sellouts and sabotage by bots. It also lets venues adjust ticket prices in real time, which is a feature not a bug.

Using dynamic pricing, the most valuable seats for a high-demand show will rise in price until they hit their market clearing value. People outraged by this system think the “actual price” or “true value” of a concert ticket is whatever number the venue decided to offer the tickets for the moment they went on sale. But that number doesn’t mean much.

As we discussed previously, a ticket’s printed price isn’t necessarily the actual market value. It’s usually set somewhat below market value to encourage a sellout. Venues make more money on concessions, so their incentive is to fill the seats. 

With dynamic pricing, tickets start at a certain price, but as in an auction the price can change if more people keep bidding for the same item.

Jimmy’s used dynamic pricing for some of its Van Morrison tickets. The top seats there went for $2,502.50 and $3,102.50 each, plus more than $500 in fees, according to NHBR.

After the show sold out, the predictable complaints about “price gouging” could be heard on local talk radio and on social media. People claimed that Van Morrison finally came to New Hampshire and they were denied tickets because the prices were so high.

Wrong.

Van Morrison came to New Hampshire only because the prices were so high. 

His October 19th show in L.A. sold out immediately. Tickets for the October 20th show range from $183.40 in the back row of the balcony to $344.85 for a restricted-view seat in the second row of the orchestra. Sorry, but you were never going to see him for $100 at a 312-seat club in Portsmouth. To make that small venue work, prices had to be many times higher than for one of his regular shows.

Dynamic pricing didn’t deny Granite Staters a chance to see Van Morrison. It gave Granite Staters a chance to see Van Morrison. Far from being “gouged,” fans were given a once-in-a-lifetime opportunity to see one of the greatest pop singers of the last 60 years at a small club in northern New England. Honestly, that’s amazing.

In the last legislative session, some legislators who don’t understand how prices work tried to ban “ticket scalping.” After this week, you can be sure someone will try to ban “gouging” as well as “scalping” next year. 

All such bans are really efforts to impose by law an economic misconception, which is that “price” is the same as “value.” It isn’t. 

A price set by a vendor might or might not be close to the actual amount of money consumers are willing to pay. When it isn’t, prices adjust up or down depending on the behavior of consumers. 

No one complains when vendors have to slash prices to clear inventory that they priced too high. But somehow it’s supposed to be immoral if vendors, either at the point of sale or in a secondary market, see that the initial price was too low and adjust the numbers up rather than down.

Calling this immoral is nonsense. Trying to ban it is harmful. Everyone would be better off if legislators stayed out of the way and let concert prices sort themselves out in an open and competitive marketplace. Consumers are best served when their preferences are expressed through the market rather than invalidated by government edict. 

Governments only ban what people would otherwise do voluntarily. If people would willingly pay thousands of dollars to have dinner eight feet away from Van Morrison in Portsmouth, as opposed to spending thousands to fly to England or California to see him in a large venue, the government has no business trying to stop them.  

Massachusetts’ millionaires tax makes it harder for the New England Patriots to recruit top players, former Patriots coach Bill Belichick said on Monday.

Asked about the millionaires tax on The Pat McAfee show, Belichick said, “That’s Taxachusetts. They take more from you.”

Because the NFL’s high pay makes most players millionaires these days, the tax implications of playing in Massachusetts are factored into player contract talks, the Patriots legend said.

“Virtually every player, even the practice squad, even the minimum players are pretty close to $1 million,” he said. “Once you hit the $1 million threshold, you pay more state tax in Massachusetts. Just another thing you’ve got to contend with in negotiations up there. It’s not like Tennessee or Florida or Nevada. Some of these teams have no state income tax. You get hit pretty hard on that with the agents.”

How many people can name any of the handful of states that have no income tax? Belichick quickly rattled off the names of three without even thinking about it.

If NFL players, coaches and agents think enough about high taxes to know which states have no income tax, what about other high earners?

For the second year in a row, the Massachusetts Society of Certified Public Accountants has issued a report warning that the millionaires tax is driving high-income professionals out of the state.

“The survey results indicate a concerning trend: a significant number of high-income individuals and businesses are considering or have already relocated out of Massachusetts,” according to the report. “This outmigration coincides with the surge in the number of taxpayers impacted by the surtax.”

More specifically:

“Every individual surveyed said that overall tax policy in the Commonwealth was either the primary reason clients are moving or one of the reasons that clients are considering moving. 55% of those surveyed earlier this year indicated that tax policy was the primary reason for relocating. Nearly everyone surveyed stated that the millionaires tax specifically factored into their client’s decision to relocate, with 64% stating that the tax was one of the reasons that their client is considering moving their domicile and 34% indicating that the tax was the primary reason for relocating.

‘Two-thirds of those surveyed reported that at least one of their clients has already established their domicile away from Massachusetts within the last 12 months. Many high-income residents are seriously considering changing their domicile, with 90% of respondents indicating that their high-income clients are considering moving from Massachusetts in the next year. This has increased by 8% in just one calendar year, from 82% of individuals surveyed in 2023.”

The top states Massachusetts millionaires say they’re eyeing? New Hampshire, Florida and Texas. (Two of the three have NFL teams, by the way. All three have no income tax.)

“Fifty-three percent of accounting professionals say that their clients are considering moving across the border to New Hampshire, suggesting that the tax burden imposed by Massachusetts plays an important part in the decision to relocate — and refuting the claims that individuals are just relocating due to a desire for sunnier weather and more coastline,” according to the CPAs’ report.

High taxes don’t send only millionaires packing. For years, the Tax Foundation has documented the moving habits of Americans and found that there’s a consistent trend of people moving from high-tax to lower-tax states. This year’s report showed that average Americans continue to flee high-tax states for lower-tax ones.

“The U.S. population grew 0.49 percent between July 2022 and July 2023, an increase from the previous year’s 0.37 percent. While international migration contributed to population growth at the national level, interstate migration was the key driver of net population changes at the state level. The U.S. Census Bureau’s most recent interstate migration estimates show that New York lost the greatest share of its population (1.1 percent) to other states between July 2022 and July 2023. Not far behind was California, which lost 0.9 percent of its residents, followed by Hawaii (0.8 percent), Alaska (also 0.8 percent), and Illinois (0.7 percent). At the other end of the spectrum, South Carolina saw the greatest population growth from net domestic inbound migration (1.6 percent), followed by Delaware(1.0 percent) and North Carolina, Tennessee, and Florida (all 0.9 percent).

“This population shift paints a clear picture: Americans are leaving high-tax, high-cost-of-living states in favor of lower-tax, lower-cost alternatives. Of the 32 states whose overall state and local tax burdens per capita were below the national average in 2022, 24 experienced net inbound migration in FY 2023. Meanwhile, of the 18 states and D.C. with tax burdens per capita at or above the national average, 14 of those jurisdictions experienced net outbound migration.

“Though only one component of overall tax burdens, the individual income tax is particularly illustrative here. In the top third of states for population growth attributable to domestic migration, the average combined top marginal state income tax rate is about 3.8 percent. In the bottom third (including D.C.), it’s 3.5 percentage points higher, at about 7.3 percent.”

Supporters of Massachusetts’ millionaires tax boast that it brought in far more revenue than predicted. This means that it’s a net gain for the state, they say. Given that 53% of Massachusetts accounting professionals said their wealthiest clients are considering moving to New Hampshire for its low taxes, it would be to New Hampshire’s short-term advantage for Bay State politicians to continue thinking that this punitive 9% income tax is good for their state. When wealthy people move here to escape high taxes, they tend to vote to keep New Hampshire’s taxes low. They also invest in their new home state, give to its charities and otherwise participate in its economic and civic life.

But in the long run, this misguided tax will hurt New Hampshire too if it slows down the Massachusetts economy. We do better when our neighbors do better. Ultimately, all of New England would benefit were Massachusetts (as well as all of our other high-tax neighbors) to pursue a competitive rather than a punitive tax policy.

 

 

 

 

Steeplegate Mall in Concord is coming down. The city granted approval this month for the building’s demolition. 

Yes, the owners of a mostly vacant large building that has become a magnet for crime (181 police calls in the last two years) needed the government’s approval to take it down and replace it with infrastructure people will actually use, like homes and a Costco.

The mall’s been largely empty since 2022. The redevelopment proposal (mixed use, retail and residential) has been moving along relatively quickly, as these things go. There haven’t been the usual disruptive community meetings with protests and long delays to get multiple variances just to replace an eyesore with something the city actually needs and people actually want.

That’s because the city rezoned the mall property years ago. It sits in a Gateway Performance District, which allows multiple uses and is designed to attract development. That’s made all the difference.

The city loosened land use restrictions to encourage economic development, and guess what happened? Economic development. 

Concord officials anticipated that the land where a huge suburban shopping mall sat might one day be put to a different, better use if market conditions changed. Because they had that foresight, a mammoth commercial structure no longer in demand will be converted relatively easily into buildings that are in very high demand.

A lot of the news stories about the mall in the past two years have focused on what Concord is losing. An outdated movie theater, a pickleball club, a community theater. An NHPR story mused about what the evictions from the mall would mean for Concord’s arts scene. 

It takes a stupefying lack of imagination to see a defunct shopping mall and lament what is lost rather than celebrate the possibilities of its transformation. 

Humans, left to their own devices, will build. They’ll create vibrant communities in which entrepreneurs devise ingenious ways of making their fellow citizens happy. Unless government forbids it. 

Governments forbid behaviors for one reason. People would otherwise do the forbidden things.

Hurting people and taking people’s stuff ought to be forbidden. But building a residence beside (or on top of) a store? Building a tiny house on a half-acre lot? Placing your home 46 feet instead of 50 feet away from the curb? These are not behaviors that harm others. 

Yet governments all across New Hampshire ban perfectly reasonable property uses like these. Why? Because some people prefer them. Without a government prohibition, people would build the kinds of mixed-use residential and commercial properties the market demands. And that just can’t be allowed, even in the “live free or die” state.  

Tuscan Village in Salem was once a horse track. When Tuscan Village was proposed, it was illegal. Salem had to change its regulations to make it legal for an entrepreneur to turn an abandoned dog track into a beautiful mixed-use residential and retail village.  

If New Hampshire wants to live up to its motto, it must repeal or relax many of the regulations that make it illegal for entrepreneurs to unleash their creativity. Local governments have to stop worrying so much about preserving the past and let entrepreneurs imagine the future. Preservation has its place. But innovation does too. And right now too many of our development rules are focused on preservation at the expense of innovation.

Speaking at an event in Portsmouth this month, economist Ali Wolf dropped a stunning statistic. Rents in the United States have risen by an average of 25% since the pandemic—but in New Hampshire they’ve risen by 45%.

Consider the news a follow-up to last July’s revelation that New Hampshire rents rose at double the rate of the prior year, even as rents fell nationwide.

New Hampshire, which is exceptionally hostile to new housing construction, is experiencing exceptionally high rent and home price growth. Go figure!

So, we’re fixing this problem by approving more and more residential units each year, right?

Right?

Well, according to U.S. Census data, the number of new building permits issued in New Hampshire in 2023 was below the number issued in 2022. And that number was down from 2021.

With demand for housing surging, the rate of new construction is slowing. 

This is not good. And it’s hurting the state’s economy and overall quality of life. But too many people can’t see this because the commercial side of the economy looks so healthy.

Last year, New Hampshire passed 100,000 corporate and LLC annual reports filed, setting a new record. And new business applications were up 10% in December of 2023 vs. December of 2022, according to the Small Business Administration.

New business creations are growing, which is a sign of a strong economy. But when only one side of the economy is healthy, it’s at risk from the unhealthy side.

In New Hampshire, there’s a disconnect between the way people think about business growth and the way they think about population growth. Some people (and many town officials) want one, but not the other.

To illustrate the point, consider small businesses that are very popular right now, such as coffee shops, craft breweries and neighborhood pubs. People love them because they create a sense of community. They’re a “third place,” a spot between work and home where people can socialize.

Coffee shops are more than just fun, though. They’re famous for being incubators of economic activity and hubs of information sharing. The London Stock Exchange was created in Jonathan’s Coffee House, located in Exchange Alley in the old City of London. The New York Stock Exchange also first met in Totine Coffee House on Wall Street.

People love coffee shops, which is why local governments are happy to approve new ones. Who protests the permitting of a new coffee house?

When towns approve coffee shops, they do a lot more than give people a cozy place to hang out. They might also be creating other new businesses.

A study published this week by the Bureau of Economic Research has found that the addition of a single Starbucks in a neighborhood can increase business startups. 

The researchers found that “compared to census tracts that were scheduled to receive a Starbucks but did not do so, tracts that received a Starbucks saw an increase in the number of startups of 5.0% to 11.8% (or 1.1 to 3.5 firms) per year, over the subsequent 7 years.”

Similarly, researchers studying the effects of pubs on social capital in Ireland found that local, rural pubs were important sources of economic activity as well as community cohesion. 

“Third places” like pubs and coffee shops facilitate both economic growth and social capital. People get excited when a new bar, restaurant or coffee shop opens in town because these businesses offer additional social opportunities.

But what happens when local governments approve lots of new bars, restaurants, coffee shops and other businesses, yet deny new housing?

What happens is you get more businesses competing for the same number of customers and employees. That’s what’s happening in New Hampshire.

In the Granite State, it’s much easier to start a business than it is to build a residence. So a lot of economic investment has been shifted away from residential construction and toward commercial and industrial development. As a result, we have a lot of businesses competing for too few employees. That’s created a labor shortage (or at least worsened a broader national labor shortage).

Governments in New Hampshire are approving new businesses, but restricting the supply of both customers and employees, which makes it hard for some of the new businesses to survive. It’s as if local planners are trying to build Hallmark movie sets–beautifully designed spaces that aren’t spoiled by the presence of regular people.

Desperate for workers, employers such as Valley Regional Hospital, the City of Lebanon and Service Credit Union are building housing for their own employees. But most small businesses can’t do that. Unable to find employees, or enough customers, they close. We’ve seen this happen with numerous bars, coffee shops and restaurants in places like downtown Manchester and Portsmouth in the last few years.

The residential shortage is already slowing the state’s overall economic growth, as highlighted by these small business closures. This imbalance between commercial growth and residential growth cannot continue. At some point, the housing supply will have to increase dramatically, or overall economic growth will have to slow further, if not contract. 

In the last several decades, local governments have happily approved new commercial developments while restricting new residential developments, as if businesses (and the economy) could grow indefinitely without any increase in customers or employees. 

Most everyone agrees that building more businesses is good for the economy and the community. They create economic opportunities and improve the quality of life. It follows that building the customer and employee base for all those new businesses is also good. Approving new businesses while deliberately depriving them of employees and customers is not a strategy for long-term success. Communities are strengthened by coffee shops that are filled with people, not by pretty but empty ones.

Congratulations to the Boston Celtics, the 2024 NBA champions! Sixteen years to the date of their last championship, the Celtics became the winningest basketball franchise in history. Now the players can spend the offseason celebrating—and paying their taxes.

Aside from the players and Celtics staff, probably no one is celebrating the title more than the Massachusetts state government, which is taking a large cut of the players’ bonuses.

Having won the franchise’s record-breaking 18th championship, each Celtics player will earn a reported $804,000 in bonuses. Fourteen Celtics players already earned more than $1 million in salary this year. With the bonus, at least two others will break the $1 million threshold and therefore be subject to Massachusetts’ new millionaires tax.

Massachusetts’ income tax is a flat 5%. But for annual incomes of $1 million or more, the state takes an additional 4%. The $804,000 championship bonus, like the salary of any player earning at least $1 million, will be subject to this 9% income tax rate rather than the 5% rate that applies to everyone with incomes of less than $1 million.

At a total tax hit of 9%, the 16 Celtics players earning at least $1 million this past season will have to forfeit $72,360 each to the Commonwealth in taxes on their bonus alone.

Without the 4% millionaires tax, each Celtics player would pay the regular state income tax rate of 5% on his championship bonus, or $40,200.

The millionaires tax thus confiscates an additional $32,160 from each qualifying player’s bonus. At 16 qualifying players, that comes to a $514,560 bonus for the state.

The difference is that the players earned their bonuses.

You might think that millionaire NBA players aren’t sympathetic figures, so who cares? But their case illustrates how the millionaires tax works to confiscate earned wealth while offering no additional services to those whose wealth was taken.

Some Celtics players earn tens of millions of dollars a year, but most don’t. The lowest-paid players might enjoy an income of more than $1 million for just this year, or for a few years. They’ll have to continue making a living outside the NBA for many decades. Being able to invest an additional $32,160 this year could make a big difference in their lives.

The same considerations apply to regular Massachusetts residents who might experience one or two exceptionally good years financially. The state confiscates an additional 4% of their income too.

New Hampshire doesn’t have an NBA team, of course, so we can’t lure Celtics players away. They’ll pay Massachusetts taxes for the work they do in Boston, even if they live here. But most other Bay Staters, particularly entrepreneurs and investors, can relocate for work more easily than professional athletes can. And many already have, including Celtics co-owner Steve Pagliuca, who warned after he relocated to Florida (not because of the tax), that the high rate posed a threat to the state’s long-term economic health.

“If we become ‘Taxachusetts’ again…the main effect will be not about a basketball player, it will be about business formation,” Pagliuca told Boston Business Journal last year. “It’s going to make it tougher to attract businesses in Massachusetts.”

The Celtics players’ tax hit illustrates the tangible difference between living and working in a low-tax, low-spending state versus one with high taxes, a billion-dollar budget deficit and not much to show for it.

WBUR on Monday labeled the millionaires tax a success because its $1.8 million in new revenue was dedicated in part to education, transportation and “free public school meals for every child in the state.”

But simply generating more revenue for government to spend doesn’t equal success. The MBTA is a money pit, and providing school meals at no charge for middle- and upper-class families who can feed their own kids is a curious use of public tax dollars for a state with a poverty rate more than three percentage points higher than New Hampshire’s.

Massachusetts taxpayers don’t get a better return for all the state’s spending. They just get more spending and higher tax rates.

In terms of taxpayer return on investment (ROI), New Hampshire taxpayers are the champions. Granite Staters receive the biggest bang for their buck, finishing first in WalletHub’s 2024 ROI rankings. And the dichotomy with our neighbor to the south couldn’t be clearer. Massachusetts came in at a distant 41st in taxpayer ROI.

Too often, people assume that high taxes equal high state revenues and therefore better public services. But higher spending doesn’t equal better services. As New Hampshire’s example shows, constraints on spending force policymakers to spend more frugally, which keeps the tax burden low and government more efficient.

Though the millionaires tax has brought in additional revenue for Massachusetts, it has not caused wiser or more careful spending. Just the opposite is true. And the long-term economic impact remains unseen. Given the well-reported exodus of wealthy taxpayers, Pagliuca’s warning still holds.

Unlike NBA players, higher-income Americans can live and work just about anywhere thanks in part to remote work options. Yet even NBA players can be motivated by lower state tax rates. Former Celtics star Grant Williams said last year that he accepted a trade to Dallas partly because of the Massachusetts millionaires tax.

If the tax can drive NBA players out of state, imagine its effect on people who aspire to become millionaires and who have the ability to live and work anywhere they want, not just in a city with an NBA team.

As Celtics fans celebrate the team’s 18th championship, the Commonwealth of Massachusetts is celebrating an additional half-million dollars in revenue. But that revenue comes from punishing most of the players by confiscating an additional 4% of their winnings. A state that treats its own sports heroes that way signals that it’s not a welcoming place for anyone who aspires to create wealth.

Bay Staters have already gotten that message. Massachusetts is among 24 states that experienced a net loss of income tax filers from 2020–2021. It ranked 45th in net migration, while New Hampshire ranked 11th.

The millionaires tax might be generating a lot of revenue now. But Celtics fans should hope that more players don’t get wise to the tax implications that come from working in Boston versus Dallas or Miami.

Kay is a 63-year-old single mom in Manchester who would love to be able to retire in the next five years. But as things stand, she doesn’t think she’ll be able to. Her adopted son needs the kind of high school environment they haven’t found among area public schools. And she needs to find the funds to pay for what he needs.

Kay and her late husband adopted their son from Kay’s husband’s niece. The niece, who struggled with addiction, had three children adopted out. Two were adopted through child protective services and eventually wound up with a grandparent, Kay said. Kay and her husband adopted their son directly, so there were no financial stipends.

In 2019, Kay’s husband died unexpectedly, and she decided to move back East from the Southwest to be closer to family for support, she said. Kay, her son, and two daughters call Manchester home.

Under the income cap legislators set for the Education Freedom Account (EFA) program, Kay’s single-mom family is classified as a “family of four,” which is presumed to have two parents and two children. That classification has put her son’s educational needs just out of reach.

Kay is a sales professional with a good job. But sales work is not always steady work in a changing economy. After she was recruited to work for a New Hampshire company, things seemed to be settling down for the family, but six months after the relocation, and two weeks before Christmas, Kay was laid off, she said.
She joined a new company in April 2023, and three months later, due to market conditions and a company restructuring, she was again laid off.

For a single mom raising a teenage son and two older daughters that she’s put through college, the money, even when it’s steady, goes fast. Even today, she’s still catching up on finances from the layoffs, she said.

State law caps Education Freedom Account eligibility at 350% of the federal poverty level. For a family of four, that’s $109,200. Kay’s salary from her new job puts her $90 over the cap, she said.

On the state’s spreadsheet, Kay’s family of four looks like a family with two working adults and two children. The spreadsheet doesn’t know the difference between that typical family and a single mom with three children.

When Kay decided to move to Manchester for its perfect location between her work and the customers she serves in Boston, she didn’t realize the challenges in the local public schools, she said. Having lived in the Southwest for years, the cost of many local private schools was another surprise.

Unable to afford a private school for her son, Kay enrolled him in a public charter school in Manchester for 7th and 8th grade. But, given her son’s unique needs and background, she’s seeking a new environment with more resources that could be dedicated to him, she said.

“He has suffered a lot of loss, has ADHD, is in counseling and needs a positive environment with resources,” she said. “He’s a wonderful kid, but needs good examples in other students, leaders, academic support, and a school with athletics and activities.”

The charter school has done the best it can with the resources it has, and there are great people working there, Kay said, but it just isn’t the right place for her son.

In search of a different setting for her son for high school, a Catholic school in Manchester came highly recommended. On a tour, they met with several teachers, administrators, coaches, and even students.

“When we toured, he got in the car and said, ‘Mom, this is my school…everyone is so nice,’” Kay said.

Her son is very excited for robotics and sports. He’s motivated by the support he’d get to excel, she said. The school has academic coaches who will help him with studying, focus and time management, which Kay said was critical for him. The school has a guidance counselor who told her son, “I will be here for your four-year journey to set you up for success in college,” Kay said. She also thinks that the spiritual focus will be a positive influence given the things he is exposed to in a big city.

When she learned about the Education Freedom Account program, Kay thought it would be the answer to her son’s educational needs. But the income cap has kept them locked out. It sees her family as a two-parent, two-child family, not a single mom with three dependents who works in an industry where layoffs are a common risk.

“I get emotional about this because it upsets me that only your W2, not life circumstances, are taken into account when applying for financial aid with schools or education funds,” she said.

When one of her daughters is no longer a qualified dependent, Kay could apply for an EFA as a family of three. But she would again be over the 350% cap, which is currently $90,370 for a family of three.

With an income cap of 425% of the federal poverty level, though, Kay’s family would qualify both as a family of four (a $132,600 cap) and as a family of three (a $109,735 cap). The 425% cap is the limit set in the conference committee version of House Bill 1665.

Without a higher income cap for the EFA program, Kay said she’d take a second job to make the tuition work if she had to. Her daughter is prepared to switch to part-time at New Hampshire Technical Institute to cut the family’s costs, she said. They’d try to make things work, but it wouldn’t be easy.

She would sell her home and downsize, but high interest rates and lack of available homes on the market make that an unrealistic option.

For Kay’s family, the EFA income cap is keeping a perfect educational option just out of reach. A cap designed for traditional families has put a single mom in the position of getting a second job to pay for the education that’s right for her son.

In trying to limit EFA access to families in need, legislators have left out families in need who don’t fit the preconception of what a “family of four” or “family of three” looks like.

As other families will be doing this week, Kay said she and her son will be watching the EFA vote on Thursday with hope. If the income cap isn’t raised, she said she’ll become an activist to push for universal eligibility next year. The difference an EFA could make for families like hers is too important for her not to get involved, she said.