New Hampshire’s Business Enterprise Tax

I’ve had this posted over on one of my other projects–The New Hampshire Center for Economic Policy–but I wanted to cross-post this here at Wealth Alchemy as a follow-up to my recent post on immediate expensing.  You see, thanks to NH not having an individual income tax, in combination with the Business Enterprise Tax, NH has de facto immediate expensing for many of their businesses (though their corporate income tax erodes this benefit).  Overall, this certainly plays a key role in NH’s economic success story.

So what is the Business Enterprise Tax and why should anyone care?

The BET is technically an “income-additive value-added tax” (pdf) that only taxes consumption and is model for good tax reform.  When it was first enacted in the early 1990s, the BET improved NH’s business tax climate because it was used to reduce/eliminate many other business taxes.  For example, the corporate income tax rate was lowered to 7 percent.

Bill Ardinger, one of the architects of the BET, wrote an excellent article summarizing the ten benefits of the BET (pdf) as a model for tax reform which are shown below:

  1. It is an economically neutral tax.
  2. It is a simple tax to compute and administer.
  3. It is a fair tax.
  4. It is a comprehensive tax.
  5. It is deductible for federal income tax purposes.
  6. It was enacted as a revenue-neutral tax reform.
  7. It avoided an “all at once” academic approach to tax reform.
  8. It addresses the jurisdictional challenges to traditional tax systems resulting from changing economies and technologies.
  9. It is a financially stable tax.
  10. It is a politically stable tax.

Ardinger has also pitched the BET to other states as model tax reform legislation.  Here is his presentation (pdf) to the Pennsylvania Business Tax Reform Commission.

I have an op-ed on the BET along these lines that I’m working on getting placed . . . when I do get it published I will post it.