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Cutting business taxes did not boost N.H. economy, new report finds

The report analyzed data from 2015 to 2022 and found “no evidence” that decreasing the state’s business taxes led to more revenue from increased economic activity.

A "Now Hiring" sign is displayed on a business window in March 2021 in Salem, N.H.Elise Amendola/Associated Press

CONCORD, N.H. — It’s a claim politicians have made time and again: promising to cut business taxes in order to attract new businesses to the state and boost economic growth.

There’s just one problem: There’s no evidence it’s worked, according to a new report published Wednesday by the New Hampshire Fiscal Policy Institute.

The report analyzed data from 2015 to 2022 and found “no evidence” that decreasing the state’s business taxes led to more revenue from increased economic activity.

On the contrary, the report estimated that the state lost between $496 million to $729 million in revenue as a result of reducing the state’s business profits tax and the business enterprise tax.


“There is no correlation that we found between the business profits tax rate and either job growth in the state or the difference between economic growth in New Hampshire and New England overall,” said Phil Sletten, a research director at the New Hampshire Fiscal Policy Institute, during a press event about the new report.

Business tax rates have been lowered from 2016 to 2023, but revenues have gone up by 118 percent as businesses have grown more profitable, which more than makes up for the difference.

So Sletten wanted to study what was responsible for driving the increased revenue.

“What we found is that it’s very unlikely that these rate reductions have led to revenue increases,” he said. “Indeed, they have likely reduced revenue.”

Business taxes are an important source of state revenue, and the business profits tax is the state’s single largest source of tax revenue, according to Sletten, while the growth was coming from the business profits tax.

The report found that growth was likely caused by factors like a rise in profits associated with the pandemic and inflation or changes to federal tax policy, not lowering taxes. State corporate tax revenues have been increasing around the country.


“What we’ve seen in our business tax revenues here in New Hampshire is not a unique phenomenon,” Sletten said.

In fact, he said, when compared to neighbors in the region and the country as a whole, New Hampshire has lagged slightly behind, according to census data from 2015 to 2021.

Change in Corporate Tax Revenues, 2015- 2021. New Hampshire Fiscal Policy Institute/Phil Sletten

There’s also limited evidence that the number of new tax filers in the state explains the increase in tax revenue. The number of filers has increased, but revenues have gone up “much more dramatically,” said Sletten.

If new filers were responsible for the increase, he said, there would be a correlation between the two.

For many businesses, a small decrease in the tax rate doesn’t make that big of a difference. For a business that pays between $1,000 to $10,000 in taxes for instance, lowering the tax rate by 0.1 percent means paying $50 less in taxes. For a business paying over $1 million, the reduction is still only $33,350 — less than how much they would pay an employee earning the median wage in the state.

New Hampshire Business Profits Tax Liability By Tax Filers and Impacts of Potential Reduction, based on tax year 2020 data.New Hampshire Fiscal Policy Institute/Phil Sletten

“Those smaller incremental changes may not be enough incentive to move someone over the border,” Sletten said.

A workforce2014 report published by a state commission tasked with studying business taxes reached the same conclusion. “New Hampshire businesses do not consider the current BPT rate [of 8.5 percent] as a primary factor in making decisions to expand or locate within the state,” it said. “Factors such as energy costs, skilled and educated work force, state infrastructure, and real estate costs (including property taxes) are more of a concern to New Hampshire businesses.”


New Hampshire’s corporate tax rate is 7.6 percent. That’s slightly lower than Massachusetts at 8 percent, but higher than Rhode Island’s 7 percent rate.

Vermont and Maine both have a graduated tax rate to tax bigger businesses at a higher rate. In Vermont, it ranges from 6 percent to 8.5 percent, while Maine ranges from 3.5 percent to 8.93 percent.

But New Hampshire relies on its corporate taxes more than any other state, according to the report. The state raised 31 percent of its total tax revenue from corporate income taxes in 2021. New Jersey was the second-highest state, with about 14 percent of tax revenue coming from corporate income taxes.

Given that reliance, Sletten said it’s important to understand what is driving the increased revenue, especially because corporate taxes are historically volatile.

Finally, the report found that “policies targeted at supporting individuals and families with low and moderate incomes likely have a more significant positive effect (on) economic growth than reducing taxes on corporate profits.”

The supplemental nutrition assistance program, or SNAP, led to the most economic stimulus, returning $1.61 in growth for each $1 spent on the program, according to Moody’s Analytics. Reducing corporate taxes only led to $.32 in economic growth.

Returns on Investment from Certain Policies. New Hampshire Fiscal Policy Institute/Phil Sletten

This article has been updated to clarify information about the business profits tax.


Amanda Gokee can be reached at amanda.gokee@globe.com. Follow her @amanda_gokee.