New Hampshire Considering Cuts to Corporate Tax Rate
June 2, 2015
The New Hampshire Legislature is considering two bills, SB 1 and SB 2, to cut the state’s Business Profits Tax and the Business Enterprise Tax. While New Hampshire generally has a good tax code, a tax cut for businesses could improve the state’s economic climate.
Because the state has no tax on wage income or general sales, New Hampshire ranks 7th overall in our State Business Tax Climate Index, but a notable weakness is that high corporate rates drive a ranking of 48th in the corporate tax rate component.
Under current law, many New Hampshire businesses pay two types of corporate tax: the Business Profits Tax and Business Enterprise Tax. The Business Profits Tax (BPT) applies to all businesses in New Hampshire with over $50,000 in gross receipts and imposes an 8.5 percent tax rate. The Business Enterprise Tax (BET) applies to companies with a minimum enterprise value tax base (the value of labor and capital resources a business owns) of $100,000 or at least $200,000 in gross receipts. The BET levies a rate of 0.75 percent.
SB 1 reduces the BPT from its current 8.5 percent to 7.9 percent by 2019. The cuts would occur in 0.2 percentage point decreases every two years. The tax cut would equal approximately $48 million by 2017 and $16 million by 2019.
SB 2 cuts the BET from its current 0.75 percent to 0.675 percent by 2019. The rate would also be scheduled to decrease by every two years until 2019. Ultimately, the reduction in this tax would generate a tax cut of $7.5 million by 2017 and $15 million by 2019.
Both bills are split down party lines with strong Republican support, but are likely to pass the Republican-dominated Senate and House. It is still unclear whether Democratic Governor Hassan would approve the bills.
New Hampshire currently holds the 10th highest corporate income tax in the country and supporters say the high rates make it difficult for New Hampshire to compete with neighboring states. If the state were to approve reductions to the business taxes, its corporate tax policy would become increasingly sound, similar to New Hampshire’s other existing tax policies.
More on New Hampshire here.
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