America’s Tax Haven–No Income, Sales or Property Taxes

No New Taxes!

Yes, you read that right, there are only a few small areas left in the U.S. where you can enjoy no state or local income taxes, state or local sales taxes and no local property taxes . . . can you guess where?  New Hampshire, of course! 🙂

First, the list gets really small quickly when you consider only two states have no state-level income or sales tax–Alaska and New Hampshire.  However, Alaska allows localities to levy their own sales tax (known as a local option sales tax).  According to the Tax Foundation’s State Business Tax Climate Index (pdf), the weighted-average of Alaska’s local sales tax yields an equivalent state-wide rate of 1.11 percent.

So that leaves New Hampshire in the no state or local income and sales tax pole position.  But wait there’s more . . . there are areas of New Hampshire where there are no local property taxes.  You can see from this data from the New Hampshire Center for Economic Policy that there are 19 unincorporated areas with a property tax mill rate of zero–I’ve also plotted them into a Google map below (you may need to zoom out).

There are also other areas that are unincorporated and have a close to zero property tax mill rate.  The most famous is probably Hale’s Location where they tout the “Hale’s Location Country Club Estate: Lakefront to Mountain side and all the fairways in between!” The 2010 property tax mill rate in Hale’s Location was only 3.04.  And there are 10 other places with single digit mill rates.

Of course, there is a catch.  Many of these places are remote and/or mountainous with few people.  Neither homes nor land come up for sale very every often and when they do they command a price premium.  Yet, there may be hope to snag some property as one of my favorite places, Millsfield, New Hampshire (adjacent to the amazing Balsams resort) which has a mill rate of zero, has this property for sale–400 acres for $1 million.  Surely there is a developer out there waiting to create the next Hale’s Location Country Club Estate.  Anyone?

Finally, recent developments in New Hampshire have resulted in the enactment of a state-wide property tax stemming from a ruling by the State Supreme Court on education funding–really it’s a back-door plot to getting an income or sales tax, but I digress.  The rate in 2010 was set at 2.19 mills, so it’s not too onerous.  This is the only thing preventing a full sweep of the big three taxes in these locations.

View New Hampshire Tax Havens in a larger map

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.