The business tax cuts that took effect this past January made New Hampshire more economically competitive, as supporters predicted, not less, as opponents suggested.
New Hampshire rose one spot this year to post the sixth-best business tax climate in the nation, according to the Tax Foundation’s 2019 rankings.
No other New England state ranks in the top 30. Maine (33), Massachusetts (36) and Rhode Island (39) are in the 30s, while Vermont (44) and Connecticut (47) are in the bottom ten.
This is exactly what the rate cuts were intended to do.
Many states are attractive to investors and entrepreneurs because of natural or cultural amenities. Massachusetts, with an excellent deep water harbor and numerous top universities, is the perfect example. States that lack big harbors, long coastlines, natural trading centers, etc., have to rely on their own ingenuity to create a more vibrant economic environment.
New Hampshire, relatively remote and mountainous, is at a natural economic disadvantage, relatively speaking. Yet “the New Hampshire Disadvantage” is not a thing. (It’s more of a Vermont thing.)
Instead, we boast of the New Hampshire Advantage, which is the result of policies deliberately crafted to make the state more economically attractive than its remote location would suggest.
Those policies have worked, and they continue to work. With no broad-based tax and, finally, regionally competitive business tax rates, Granite Staters have made their home a more attractive place to do business than either of our also remote northern New England neighbors.
Low business tax rates along with an overall low tax burden is the combination that produces the most business-friendly tax environment, the Tax Foundation report shows. Eight of the top ten states lack at least one broad-based tax, such as an income or a sales tax.
Of the top ten, only the bottom two (Utah, 9, and Indiana 10) have all major taxes. But they differ from many other states in levying those at low rates among a broad base.
With the recent success in lowering business tax rates, lawmakers will find it challenging to further enhance the New Hampshire Advantage through the manipulation of tax rates in the near future.
This suggests that more promising gains can be achieved by working on other impediments to growth and entrepreneurship, such as housing and occupational licensing regulations, overly burdensome business regulations and energy policy.