While New Hampshire is well regarded for its overall tax environment, the Granite State’s business tax competitiveness is lagging.

Nonpartisan experts at the Tax Foundation rank New Hampshire’s overall tax system third best in the country but just 37^th for business tax competitiveness. That places us behind New York, Connecticut, Rhode Island, and Massachusetts, and just one spot ahead of Vermont.

For more than a decade, New Hampshire lawmakers have fought to make the business tax climate more competitive regionally, nationally, and globally. That’s meant reducing the rate and raising the filing threshold of the state’s two main business taxes – the Business Enterprise Tax (BET) and Business Profits Tax (BPT) – while more than doubling the amount of revenue collected from those taxes.

State lawmakers continue working to reduce the burden and make New Hampshire’s tax system more competitive by increasing the Section 179 Small Business Capital Investment Deduction, reducing the BET burden, and more.

Two proposals for BET relief are on the table this year, both of which would improve the state’s tax competitiveness.

The first would reduce the rate from 0.55% to 0.50%. The second would increase the filing threshold from the current level of $298,000 to $375,000.

The BET is based on a business’s enterprise value, which is defined as “the sum of all compensation paid or accrued, interest paid or accrued, and dividends paid by the business enterprise, after special adjustments and apportionment.” For many small businesses, the BET is largely a payroll tax.

The filing threshold is the enterprise value below which a business does not have to file a BET return. Raising the filing threshold relieves more of the smallest businesses from BET liability or having to file a BET return at all.

The roughly $77,000 increase in the BET filing threshold would exempt more than 3,000 additional small businesses from having to pay the tax, collectively saving them over $2 million in BET liability.

The state’s smallest businesses have faced extraordinary challenges over the last six years. It took years for small business owners to recover from the economic impact of the COVID-19 pandemic. Nearly three years after the start of the pandemic, a third of small business owners still reported sales down 25 percent or more from pre-pandemic levels.

Some headwinds exacerbated by the pandemic still have not fully subsided.

Hiring and retaining qualified applicants remains a serious obstacle to small business growth. Eighty-seven percent of small businesses who are hiring report receiving few or no qualified applicants for open positions. This is a significant hindrance to maintaining and growing sales levels.

Exempting more small employers from the BET allows them to invest more money in their workforce. It means higher wages, better benefits, and increased training.

Above all, it means more growth on Main Streets across New Hampshire.

Improving the state’s business tax climate is a long-term effort. Reducing the burden from the main business taxes while improving other key small business tax treatment (e.g., Sec. 179, Net Operating Loss rules, healthcare affordability, etc.) are important steps in the right direction.

NFIB New Hampshire encourages lawmakers to continue the tax reform progress that began a decade ago and make the Granite State a better place for small business.