New Hampshire remains the best New England state for businesses and taxpayers as a new report finds it has the best business tax climate in the Northeast.
With no sales tax, no state tax on individual earned income, and a 4 percent tax on interest and dividend income that expires in 2025, New Hampshire has the best tax climate in the region — and the sixth best in the U.S. — according to the nonpartisan Tax Foundation’s State Business Tax Climate Index.
In fact, the Granite State is the only Northeastern state represented among the 10 best climates.
Wyoming tops the list, followed by South Dakota, Alaska, Florida, Montana, New Hampshire, Nevada, Utah, North Carolina, and Indiana.
Meanwhile, New England dominates the worst states. The bottom 10 — 41 to 50 — are Rhode Island, Hawaii, Vermont, Minnesota, Maryland, Massachusetts, Connecticut, California, New York, and New Jersey.
In other words, the Granite State remains the tax haven of the Northeast.
“New Hampshire’s approach of business-friendly regulatory and tax policies that foster economic growth continues to attract and retain all types of businesses, including vital industries such as manufacturing,” said Michael Skelton, president and CEO of the Business & Industry Association.
“New Hampshire’s tax system allows Granite State businesses to grow and compete nationally and internationally while providing strong state revenues for investment in key business initiatives, including workforce development and workforce housing.”
Compare that to Massachusetts, which fell further than any other state in the rankings — a full 12 spots from last year, making the Bay State the fifth-worst state for competitiveness.
In November 2022, Bay State voters amended the state constitution to raise the income tax rate from five percent to nine percent on annual incomes of at least $1 million. The Tax Foundation attributed Massachusetts’ drop to the state’s new “millionaire’s tax.”
As a result, the Bay State saw its ranking in the Index’s individual tax component fall from 11 to 44 in just one year.
Gov. Maura Healey’s (D-Mass.) office declined to comment.
Mass Fiscal Alliance spokesman Paul D. Craney issued the following statement: “Across the board, we’re seeing bad policy decisions from Beacon Hill exacerbating an already dangerous situation. They paid lip service to competitiveness this year, but when the final product was delivered, it did more harm than good. It’s an absolute forced error on the part of the legislature and one which we’ll all be paying for in the coming months as people and wealth continue their outward flow from the commonwealth.”
Supporters of Massachusetts-style tax rates say they lead to significant revenues and surpluses for the state to then provide a higher level of services to citizens. But in New Hampshire, lower tax rates have led to higher revenues.
While the state ranks 47th in state tax collections per capita — $2,313 per Granite Stater — the state has seen surplus after surplus. In the General and Education Trust Funds, revenues were $435.5 million above budget in FY 2022, $323.7 million above budget in FY 2021, and $172.9 million above budget in FY 2019. (Unsurprisingly, with the COVID-19 pandemic, FY 2020 was the only exception.)
Unofficially, total revenues were $538.9 million above budget in FY 2023.
Moreover, New Hampshire’s tax structure has become friendlier to businesses. As both the Business Profits Tax and Business Enterprise Tax have been successively reduced from 8.5 percent and 0.75 percent in 2015, respectively, to 7.5 percent and 0.55 percent in 2023, total business tax revenue has jumped 118 percent from $561.7 million in FY 2015 to $1.224 billion in FY 2022.
And business tax revenue surpluses each fiscal year have grown over this period. Total business tax revenues were $260.9 million above budget in FY 2022, $217.2 million in FY 2021, $151.6 million in FY 2019, $118.8 million in FY 2018, $72.7 million in FY 2017, and $132.8 million in FY 2016. (Again, FY 2020 was the only exception.)
The state saw an (unofficial) business tax surplus north of $323 million in FY 2023.
New Hampshire also boasts the lowest poverty rate in the country (7.1 percent) and ranks #4 in economy, #3 in economic growth, and #1 in both overall opportunity and economic opportunity in U.S. News and World Report’s Best States Rankings.
And people are moving to New Hampshire as a result. The Granite State’s population grew by 7,700 from July 2021 to July 2022. It is one of only two New England states (along with Maine) that have seen its population grow yearly since 2018.
Professor Kenneth Johnson at the UNH Carsey School of Public Policy writes, “In all, 10,200 more people moved into New Hampshire than left between July of 2021 and July of 2022.”