1. Policy Research Shop Support for the Policy Research Shop is provided by the Ford Foundation and by the Fund for the Improvement of Postsecondary Education, U.S. Department of Education. Policy Research Shop New Hampshire Business Taxes An Evaluation of the New Hampshire Business Tax Climate

2. Policy Research Shop Introduction “What Tax Environment promotes jobs, income growth, and environmentally friendly practices?” “Are targeted incentives like Research & Development Incentives an effective way to achieve these goals?”

3. Policy Research Shop Introduction Business Tax Environment.. Not Just the Business Profits Tax Tax Strategies for Economic Growth by Sector An Exploration of Incentives & Credits

4. Policy Research Shop Questions When Developing Tax Policy What are New Hampshire’s Policy Goals? How can these goals be accomplished through tax policy? – Specific tax bundles – Reallocation of tax revenue – Credit or incentive

5. Policy Research Shop It’s Not Just About Corporate Income Taxes

6. Policy Research Shop Taxes affecting Businesses Business Profits Tax (8.5%) – Generated $305 million in revenue in 2009 Business Enterprise Tax (0.75%) – Generated $175 million in revenue in 2009 Comparison: – High compared to surrounding states (ME, MA, VT) 6

7. Policy Research Shop Property Taxes – 68% of funding for New Hampshire’s public education Other Taxes on Inputs Electricity Consumption Tax Communications Tax (7.5%) Real Estate Transfer Tax (1.5%) Comparison 7 Taxes affecting Businesses

8. Policy Research Shop No General Sales Tax – Population of consumers – Elasticity of goods Meals and Rentals Tax (9%) Comparison : – Sales Tax Holidays becoming national trend – Meals and Rentals Tax common in Northeast region 8 Taxes affecting Businesses

9. Policy Research Shop No Individual Income Tax -Corporate Revenue -Labor Costs -Consumer Demand Interests and Dividends Tax (5%) 9 Taxes affecting Businesses

10. Policy Research Shop Economic Growth Options

11. Policy Research Shop Research on Tax Reform No Magic Bundle – for growth in every sector – to make up for revenue lost Tax Revenue – more effective for targeting certain areas

12. Policy Research Shop A Picture of Employment in NH Percent of Employment in State

13. Policy Research Shop A Picture of Businesses in NH (35)(67) (2,779) (886)(509) (144) (4,038) (6,438) (20,169) Number of Employees in Company Number of Employees State Wide

14. Policy Research Shop Goals Business Profits Tax (&BET) Property Tax Sales Tax Personal Income Tax Notes Current Tax Bundle High High Low LowFriendly Overall! New Business Plant Locations Small Business Start Ups Foreign Direct Investment Revenue Used for Education and Infrastructure No Corporate Tax Relief Programs for Low Profit Businesses BPT ↑.85% # of New Plants ↓2-3% Chart 1. Tax Structure and Business Promotion

15. Policy Research Shop Incentives and Credits

16. Policy Research Shop Why Incentives? Alternative method to support policy goals Easier to adjust Sharper focus Encourage specific business behaviors

17. Policy Research Shop Effects of Incentives Revenue Generation – No real academic consensus Social Benefits and Policy Goals Limited Research

18. Policy Research Shop Current New Hampshire Programs Innovative Business and Job Creation – Research and Development Tax Credit Workforce Retraining – Job Training Fund Encouraging Investment in Specific Regions – Coos County Job Creation Tax Credit – Economic Revitalization Zones

19. Policy Research Shop Innovative Incentive Programs Green Industries Tax Credit – Delaware Business Energy Tax Credit – Oregon Employment Growth Incentive – Vermont

20. Policy Research Shop Conclusion New Hampshire is currently relatively business friendly – Taxes balance out positively – Simple and effective incentive programs What types of business does New Hampshire want? What types of business should its tax policy cater to? – Use the answers to determine ideal relative tax levels 20