In Fiscal Year (FY) 2013, New Hampshire collected $5.5 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average New Hampshire taxpayer can afford this level of taxation.
As shown in Charts 1 below, New Hampshire’s state and local tax burden (tax collections divided by personal income) was the 4th lowest in the nation for FY 2013 at 8.2 percent—or 20 percent below the national average of 10.3 percent. Not surprisingly, as shown in Chart 2, the tax burden has grown modestly over time by 18 percent to 8.2 percent in FY 2013 from 7 percent in FY 1950.
New Hampshire is also the only state in the U.S. where an individual can enjoy the not paying any state or local personal income tax, state or local sales tax and no local property taxes. As such, New Hampshire may be the home of the only tax havens left in America.
Alaska comes the closest to tax haven status (and if you exclude their severance taxes), but they allow towns to levy their own sales tax—which is the equivalent to a state-wide 1.69 percent sales tax according to the Tax Foundation.
Some critics like to point out New Hampshire’s high property tax burden which in FY 2013 was 5.3 percent and is the 2nd highest in the country. However, property taxes are very location specific.
Generally speaking, the higher population towns in the southern part of the state levy the higher property tax rates while the lower population towns in the northern part levy lower property tax rates (the exceptions to that rule are the old mill towns like Claremont and Berlin). In fact, in our previous New Hampshire blog post, I go into detail as to where there are many towns with low to no property taxes at all (with all located, you guessed it, “north of the notches”).
More importantly, New Hampshire is home to the only state-level flat tax in the country known as the Business Enterprise Tax. I have written a plan to fully reform New Hampshire’s business tax system into a single rate, Business Flat Tax that would completely eliminate the extremely onerous Business Profit Tax (pdf), among other changes. You can read more about it in my recent post: “State and Local Business Taxes 2014”
Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in New Hampshire—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
The New Hampshire counties with the highest local government tax burden include: Belknap County, NH (6.2 percent), Carroll County, NH (5.9 percent), and Grafton County, NH (5.9 percent). The New Hampshire counties with the lowest local government tax burden include: Hillsborough County, NH (3.9 percent), Rockingham County, NH (4.5 percent), and Merrimack County, NH (4.8 percent).
J. Scott Moody has nearly 20 years experience as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as the American Conservative Union Foundation, Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.