Texas Gov. Rick Perry talks with Tom Thomson during the Americans for Prosperity Foundation Business Tax Rate Study event Friday night at the Yard in Manchester. (Thomas Roy/Union Leader)
MANCHESTER — A study released Friday by the conservative political group Americans for Prosperity Foundation claims high business tax levels in New Hampshire are limiting economic growth in the Granite State.
According to the report, New Hampshire has the 2nd highest business tax burden per capita and the 3rd highest business tax rate in the nation. New Hampshire increased business taxes in 2001 and 2002.
According to the report, in the decade prior to the tax hikes, business tax revenue grew by 42.67 percent. In the years since, business tax revenue has grown by 4.76 percent, which the study authors say signals that higher taxation levels are limiting economic growth in the Granite State.
The study was released Friday night at a dinner at The Yard Restaurant featuring keynote speaker Texas Gov. Rick Perry.
“There is data here showing when states over-tax, over-litigate, over-regulate and fail to produce an educated workforce because of underperforming schools, they lose workers and businesses to other states,” said Perry, during a visit to the New Hampshire Union Leader office prior to last night’s dinner. “The type of companies that require skilled workers, and the high-paying jobs they offer, go elsewhere.”
“The purpose of this study is to inform the debate on business taxes and their impact on New Hampshire’s economy,” said Greg Moore, AFPF-NH state director. “We certainly understand that several candidates have put forth plans to explore changes in the state’s business tax structure, and this research in no way endorses any plan. The goal was to understand how the existing tax structure on employers affects New Hampshire’s economy and the state’s competitiveness. Ultimately, states are either moving forward or they are falling backwards, and the very high business tax rate here is eroding the New Hampshire Advantage.”
The study also claims that due to the lack of economic opportunities, New Hampshire’s demographics are becoming older, with young people leaving for better prospects in other states.
Perry is in New Hampshire this weekend meeting top Republicans while testing the presidential primary air, his first trip to the first-in-the-nation primary state since a failed presidential bid in 2012. Perry was indicted last week by a grand jury in Austin, Texas, on charges stemming from a veto last summer of state funds for public corruption prosecutors. He pleaded not guilty on Tuesday.
Moore said Perry was invited to speak at Friday night’s dinner due to the economic success Texas has enjoyed under his tenure as governor.
“Governor Perry has a proven track record when it comes to growing Texas’ economy and creating jobs,” said Moore. “He’s the right person to talk about the importance of enhancing a state’s competitiveness for economic growth. Economic growth is a central issue that’s on the minds of everyone, both in terms of creating jobs and increasing wages.”
Perry credits the economic growth in Texas to adhering to four basic principles.
”Have a tax structure that’s as light on the job creator as you can be, a regulatory climate that is fair and predictable, a legal system that doesn’t allow for oversuing, and accountable public schools so you have a skilled workforce,” said Perry. “Those are the four legs of the foundation of what we are doing in Texas.”
Currently, New Hampshire levies two primary taxes on businesses, the business enterprise tax (BET) and the business profits tax (BPT). The BPT tax was put in place in 1970, and despite a different name, functions in much the same way other states’ corporate income taxes work.
Businesses are required to figure out the amount of income earned that is attributable to its facilities in the state of New Hampshire. Companies that have total sales receipts in excess of $50,000 are subject to the BPT.
The second business tax in New Hampshire is the Business Enterprise Tax (BET). Implemented in 1993 as a way to ensure that all businesses with more than $200,000 in taxable activity operating in the Granite State pay some form of taxation into the state’s coffers, it operates like a value added tax, in that the BET is assessed against the additional value that is created when a service or a good is produced in New Hampshire.
The current BPT rate is 8.5 percent. This is an increase from 2000, amounting to 7.0 percent. The BPT was raised in both 2001 and 2002, to 8.0 and 8.5 percent respectively. Additionally, the BET in 2000 was assessed at .25 percent. The BET is currently at .75 percent.
According to the report, despite these rate hikes, after an initial spike in revenue collected by the implementation and collection of the education fund, the total amount of revenue collected has stalled. Revenue growth increased by 4.76 percent from 2000 to 2014, in comparison to the 42.67 percent growth from 1990 through 1999.
The report points out what it claims are additional indicators of economic stagnation. In 2000, the state collected $2.497 billion in total revenue — the general fund, plus the education and highway funds. In 2009, the state collected $2.465 billion, meaning almost $32 billion fewer in revenue was collected than a decade earlier.
The report shows in New Hampshire, the overall population is getting older at a faster rate than the rest of the country. From 2000 to 2010, the population age segment that grew the fastest was the 45- to 64-year-old bracket.
According to census figures, 57,000 people between the ages of 25 and 44 left the state over the same period. The report states that more than 90 percent of the growth in New Hampshire over the first decade of the new millennium was people at or near retirement age.
The report concludes New Hampshire officials should develop policy “recreating the business friendly environment that it had under governors like Mel Thomson,” by lowering the BPT and BET rates to 1993 levels.
It’s an approach Perry agrees with.
“When it comes to the critical areas of economic success and job creation, it’s no secret why Texas sets a national example,” Perry said. “We keep taxes low, maintain fair and predictable regulations, and protect our citizens from frivolous lawsuits. These principles create an environment allowing hard-working citizens and businesses to prosper. We put Texas on track to be today the most successful economic state in the nation. Thirty-five percent of all the jobs created in the U.S. since I have become governor were created in the state of Texas. It can work here.”