The New Hampshire Center for Economic Policy recently unveiled a proposal to consolidate multiple state business taxes into a single Business Flat Tax (BFT). One gubernatorial candidate, Andrew Hemingway (R), has decided to make this revenue-neutral restructuring of the New Hampshire tax code a center point in his plan to revitalize the state’s economy.
The plan put forth by Hemingway and the New Hampshire Center for Economic Policy eliminates the 8.5 percent Business Profits Tax, the 5.5 percent Medicaid Enhancement Tax and restructures the Business Enterprise Tax to a 2 percent flat rate while cutting the Interest and Dividends Tax from 5 percent to 2.3 percent.
Meanwhile, not-for-profits, such as universities and hospitals, and state government would be subject to the tax for the first time. A 2006 report estimates almost 100,000 are employed by not-for-profits, a huge tax base. If these two loopholes were closed for the current business enterprise tax, the tax rate would fall from 0.75 percent to 0.55 percent.
Americans for Tax Reform supports this effort to simplify and reduce taxes on businesses while also curbing government’s cost for tax collection. If this proposal were enacted, the compliance cost for business is greatly reduced. The proposed businesses flat tax can be filled out on a post-card sized sheet and all business establishments are treated equally, regardless of organizational structure.
Another benefit of this proposal is that savings and investment are exempt from the BFT. This makes it theoretically possible for a business to pay no tax if all revenue was invested.
Hemingway noted, “In order to make New Hampshire more competitive both nationally and globally, we must restructure out tax rates.” Simplifying and flattening New Hampshire’s business tax code will give the state a huge advantage against its regulation heavy neighbors like Massachusetts.
Both Hemingway and his primary opponent, George Lambert, signed the Taxpayer Protection Pledge, a written commitment to New Hampshire voters to oppose and veto any and all efforts to raise taxes. Revenue-neutral tax code restructuring, such as Hemingway’s is consistent with this important commitment to taxpayers.
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