Last week, the Council on State Taxation (COST), a Washington, DC-based association that represents the interests of over 600 multistate and multinational corporations, issued the latest edition of its annual report on state and local business taxes. While this is the 11th edition of COST’s reports, its implications may still come as a surprise to some in New Hampshire.
Importantly, the data contained in COST’s report suggest that:
Business taxes in New Hampshire are lower than in most states.
In its report, COST tallies all of the taxes paid by businesses in a given state – not just corporate income taxes, but property, sales, and income taxes as well – acknowledging that states raise revenue in a variety of ways that affect businesses. It then compares those totals to total economic activity in each state – as represented by private sector gross state product – to calculate a total effective business tax rate. For New Hampshire, that figure was 4.2 percent in FY 2012, markedly lower than the national average and less than 38 other states.
The property tax is the most significant business tax in New Hampshire.
In recent years, New Hampshire legislators have pushed through a variety of reductions to the Business Profits Tax (BPT) and Business Enterprise Tax (BET). Most recently, for instance, the FY 2014-2015 budget created a new exemption within the BET for businesses that employ workers who receive part of their pay in the form of tips.
With this kind of focus, one might expect that the BPT and BET comprise the largest parts of the business tax bill in New Hampshire. They don’t. The most significant business tax in New Hampshire, as is the case in most other states, is the property tax. In the aggregate, the property taxes paid by businesses in New Hampshire constitute 45.5 percent of their state and local tax bill. The BPT and BET, classified as corporate income taxes in the COST study, make up less than half that share – 21.3 percent.