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Wednesday, October 21, 2009

Live Blogging the Tax Summit- Scott Hodge

Scott Hodge- President of the Tax Foundation.
Former Director of Tax and Budget Policy at Citizens for a Sound Economy.

"New Hampshire's tax burden is low and its tax climate ranks highly. Don't mess up a good thing."

Hodge recommends that New Hampshire improve its corporate tax structure and increase revenues through growth, rather than new or higher taxes. He says state lawmakers should avoid pressure to have a "three-legged stool" tax system by adding either a sales or wage tax, which would ruin New Hampshire's tax advantages over neighboring states.

He says New Hampshire has attracted $220 million in adjusted gross income from people moving to the state in recent years.

Hodge points out that high tax states have not avoided the same fiscal challenges as New Hampshire. He uses the Connecticut example of a tax that recently imposed an income tax, but is now facing huge budget deficits.

Hodge says that 16% of New Hampshire residents work out of state, largest of all states after Washington, DC and Maryland. This means an income tax would collect far less than otherwise expected, since those workers would not pay income taxes to New Hampshire.

He also compares New Hampshire 0% sales tax to its neighbors, ranging from 4% in New York to 6.25% in Massachusetts, and 0% income tax, compared to 5.3% in Massachusetts all the way to 9.4% in Vermont. Overall, he says New Hampshire ranks 46th in overall tax burden, while all of its neighbors are among the top half of most-taxes states.

New Hampshire ranks seventh overall for its business tax climate, and joins Deleware as the only states in the Northeast among the top ten in the country.

He says the 8.5% corporate tax rate is comparable to other New England states, but high compared to the national average. He say recent research shows business taxes are more important than ever before in attracting new investment. He says corporate income taxes are the most harmful to economic growth, followed by personal income taxes, sales taxes, and finally property taxes.

Hodge shows that while the U.S. has left its corporate tax rate close to 40%, while other nations are slashing their corporate tax rates. He says New Hampshire combined corporate tax rate, after adding federal and state taxes, ranks among the highest in the world.

His recommendation are:
1) Avoid a wage tax at all costs.
2) Repeal the Business Enterprise Tax
3) Lower Corporate Income Tax Rate

He says lower taxes for all are better than tax incentives for some. He says New Hampshire's goal should be to be like Wal-Mart is a land of Neiman-Marcuses by having lower taxes everyday.

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