NRSC - UL: Hassan vs. NH Business: Her 'Out-Of-State' Charade




Union Leader: Hassan vs. NH Business: Her 'Out-Of-State' Charade

June 21, 2015

Gov. Maggie Hassan last week claimed that New Hampshire business taxes really are taxes on out-of-state businesses. Therefore, we don’t need to cut them. This is nuts, as well as incorrect.

In her Thursday statement declaring why she would veto the state budget, she said it gives “unpaid-for tax cuts to big corporations, mostly headquartered out-of-state” and that will “put corporate special interests ahead of New Hampshire’s families, small businesses and economy.”

The Republican budget trims the state business profits and business enterprise taxes. Will most businesses that receive those tax cuts be headquartered out of state?

Hassan’s office says she based that claim on a 2011 New Hampshire Fiscal Policy Institute (NHFPI) report, which used data from 2008. That report, “Business Taxes in New Hampshire: Where Do They Stand? How Much Do They Matter?” contains this section headline: “Of those businesses that incur a BPT or BET liability, the large majority are based outside New Hampshire.”

But the headline was incorrectly worded. The state Department of Revenue Administration (DRA) figures on which the NHFPI says that report was based show that more than half of business tax filers in 2008 were identified as New Hampshire companies. What the NHFPI report intended to show, rather, is that the majority of business tax revenue is paid by out-of-state businesses, not that most taxpaying businesses are from outside the state.

Yet that assertion is not verifiable.

According to the DRA, it could only approximate where a business was headquartered in 2008 by using the business’s Federal Employer Identification Number. But when businesses move, their federal ID numbers stay the same. A Massachusetts business that moved to New Hampshire in 2005 would still appear to be a Massachusetts business in 2008. So although the figures suggest most business tax revenue came from businesses that were created in other states, we cannot tell for certain. Today, the DRA collects no information on business headquarters, not even the federal ID number, so no one knows what the current breakdown is.

But even if most business tax revenue is generated by companies with out-of-state headquarters, Hassan is wrong to suggest that this negates the need to cut rates.

Lower rates will make New Hampshire more attractive, higher rates less attractive, regardless of where a company is based. Furthermore, assuming out-of-state companies do generate more than half of New Hampshire business tax revenue, one might wonder why New Hampshire, with the fourth-worst corporate tax burden in the nation (even Washington, D.C.’s is better), would have such a large portion of its business tax revenue paid by companies based outside the state. This seems not to occur to the governor.

Worst of all, though, Hassan ignores the effect of the state’s high business tax rates on New Hampshire businesses. To generate a cheap (and false) partisan talking point — that Republicans put out-of-state corporate interests first — she consigns New Hampshire businesss to continuing to pay the third-highest state corporate tax burden in the nation. That is one strange way to look out for New Hampshire small businesses.