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1 Scott A. Hodge, Taxes, Competitiveness and the New Hampshire Business Climate: Testimony before the New Hampshire Legislature 1 (2009)

handle is hein.taxfoundation/taxfaagd0001 and id is 1 raw text is: Taxes, Competitiveness and the New Hampshire Business Climate Scott A. Hodge President Tax Foundation Testimony Before the New Hampshire House of Representatives Ways and Means Committee Thank you for the opportunity to talk with you today about New Hampshire's tax and business climate and discuss what reforms could improve the state's competitiveness and prospects for long-term economic growth. The Tax Foundation brings more than 70 years of experience to state public finance issues. We were founded in 1937 to produce credible data and sound economic research on public finances at the federal, state, and local levels of government. Our goal is to make taxes easy to understand in order to raise the tax IQ of the public, legislators, and our friends in the media. Our research is guided by the core principles of tax policy: neutrality, simplicity, transparency, and stability. New Hampshire, like virtually every state in the Union, is struggling to weather the twin fiscal stresses of the weak economy - lower tax revenues and higher demand for public services. The challenge must seem particularly difficult for a state like New Hampshire which does not have all of the major taxes such as an income tax or general sales tax. It is not surprising that many parties in your state are calling for New Hampshire to have a normal tax system that relies on the three legged stool approach to public finance by having a wage tax, a corporate income tax, and a general sales tax. Based upon the collective wisdom of researchers at the Tax Foundation over the past 70 years, I would suggest that giving in to such pressure would be a huge mistake. The economic equivalent to unilateral disarmament, to use a military phrase. It would be like taking the electric motor out of a Prius - making New Hampshire just like any other state. What might seem like a curse to you right now is actually your competitive advantage within the Northeast region and even nationally. As appealing as it might be to have new sources of revenues to tap, let me point out that when we look across the country, the states that are in the biggest financial trouble are the three-legged stool states such as New York, California, Pennsylvania, Illinois, and Connecticut. You do not want to end up like Connecticut which was once a low-tax state like New Hampshire without a personal income tax. Eighteen years ago they enacted an income tax for many of the same reasons interest groups are now calling for one here. In less than a generation Connecticut went from having one of the lowest tax burdens in the nation to having the third highest. Even with such a high tax burden

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