One of the loudest critics of the recent wave of corporate inversions is University of Southern California law professor Ed Kleinbard, who warns that these transactions will erode the U.S. corporate tax base because...
- PolitiFact quotes Scott Drenkard on business taxes in New...
PolitiFact quotes Scott Drenkard on business taxes in New Hampshire
By MARYALICE GILL
Says when Republicans took over the state Legislature in 2010, New Hampshire’s tax rate for employers was 50th in the nation and unemployment had more than doubled under Democrats.
House Speaker Bill O’Brien in a campaign mailer sent to New Boston residents in August
Eyes and ears for questionable campaign claims are everywhere.
A New Boston reader recently reached out to PolitiFact New Hampshire with a campaign mailer he received from Speaker of the House Bill O’Brien, R-Mont Vernon, this summer.
The material was one of many tools incumbents are employing in a tussle for party control of the Statehouse in 2013.
“When Republicans took over the Legislature in 2010, we inherited a tax rate for employers that was 50th – dead last – in the nation,” O’Brien said. “Add to that one of the most intense regulatory state government structures in the country, and it was no wonder that the unemployment rate had more than doubled since the Democrats took power four years prior.”
Along with this excerpt, our reader had a simple request: “Would you be willing to crunch the numbers here?”
We were happy to oblige.
First, we reached out to O’Brien through his campaign email and phone number, but we heard nothing back.
We broke his claim into two parts, and reached out to the Tax Foundation and New Hampshire Employment Security for some answers.
The Tax Foundation, a business-backed policy group, offered some guidance for the part of the claim in which O’Brien speaks about New Hampshire’s “tax rate for employers” in 2010.
That year, New Hampshire ranked 50th on the Tax Foundation’s corporate tax index, according to economist Scott Drenkard.
Every year, the Tax Foundation takes an “all-encompassing” look at the tax system of a state, Drenkard said, breaking it into five subcategories: corporate, income, sales, unemployment insurance and property taxes.
“The word ‘rate’ is concerning to me because it’s not exactly what it looks at,” Drenkard said. “The rate is only part of this story.”
Drenkard pointed us to a New Hampshire Watchdog article that broke down the Tax Foundation’s ranking at the time.
As part of the study, New Hampshire ranked seventh best for overall business tax climate, and had been seventh since 2007. In 2006, the state was sixth.
“New Hampshire’s economic competitiveness was dragged down in the rankings by its worst in the nation corporate tax policy,” according to the article.
“The rate is fairly high,” Drenkard said. “That’s part of the component there. There’s a business profits tax, and New Hampshire limits carry-forwards, one of the things that’s an important part of the base.”
New Hampshire also got “dinged” in 2010 for offering credits for creating jobs, as well as research and development credits and investment credits, which the Tax Foundation scores as negative in its corporate tax policy, Drenkard said.
“Those, for the most part, mixed with the high rate, ended up putting it in 50th in 2010,” Drenkard said. “In general, the spirit of what he’s trying to say is certainly true. We rank it as one of the worst corporate tax structures in the country.”
State legislatures write the laws that affect tax structure, Drenkard said. But it’s important to note that in 2012 – under a Republican-controlled Legislature – the Granite State hit only 46th in its corporate tax rank compared with the rest of the country.
Each Tax Foundation study is considered exclusive to the year in which it’s conducted and shouldn’t be compared with previous ranks, Drenkard said.
“For the most part, I don’t remember hearing any fantastic corporate tax reforms from New Hampshire, at least recently,” Drenkard said. “So the story is it was bad in 2010, and for the most part, is still one of our lowest ranked corporate tax codes.”
As for the Granite State’s unemployment statistics, O’Brien is fairly accurate on the numbers by themselves.
“Roughly, you could say it doubled,” said Annette Nielsen, an economist for New Hampshire Employment Security.
Looking at 2006 generally – four years before Republicans took over the state Legislature in November 2010 – unemployment was in the 3.4-3.7 percent range, Nielsen said.
It stayed that way through May 2008, she said. The recession hit in November and December that year, and state unemployment numbers started rising.
By December 2008, the unemployment rate was 4.8 percent. By October 2009, it peaked at 6.7 percent, and stayed that way through January 2010.
That isn’t quite the “more than doubled” number O’Brien cited, but close.
New Hampshire’s increasing unemployment rate followed nationwide trends, Nielsen said.
“The nation was at a much higher rate,” Nielsen said. “It peaked in October at 10.1 or 10.2 percent. It followed the general trend of the nation.”
Are Democrats to blame for the increased unemployment figures?
“Whether it could be better or worse, that’s kind of a little more individual – what people maybe feel,” Nielsen said. “There are some forces that are national that have an impact. New Hampshire is not an island by itself. It’s part of the nation, and there were some greater forces that were taking place at that time.”
Dennis Delay, an economist with the New Hampshire Center for Public Policy Studies, an independent nonprofit that pursues data-based research on public policy matters, agreed.
Unemployment increased in New Hampshire as a result of the recession, he said.
“States with Republican legislatures also saw unemployment rates rise substantially after 2007 because of the worldwide financial crisis and its impact on local economies,” Delay said.
He provided a graph of job losses in the U.S. and compared it to New Hampshire, which shows the spike in job losses nationwide during that period of time.
“The situation in New Hampshire looks similar, although New Hampshire did not lose as many jobs in percentage terms as the U.S.,” Delay said.
O’Brien said that when Republicans took over the state Legislature in 2010, the state’s tax rate for employers was last in the nation and unemployment had more than doubled under Democrats.
We find he generalized a 2010 tax study, zeroing in on New Hampshire’s corporate tax rate, when several other factors contribute to the Tax Foundation’s corporate tax index for New Hampshire. And he failed to mention that New Hampshire’s corporate tax rank is in the same ballpark in 2012.
O’Brien used accurate unemployment figures in comparing 2006 to 2010, but the numbers have more to do with the Great Recession than with the people – or the party – running the state.
O’Brien was on target with the rank and rates he cited, but there is context missing and misplaced blame. We rate his claim Half True.
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