New Hampshire's Koch Business-Tax-Cuts Have Been A Bust.
New Hampshire’s business taxes are back in the news because the local Koch organization and State-Reps/Senators allied to Koch (“Koch Reps/Senators”) want to further cut the rate of the Business Enterprise Tax (“BET”). The BET is, as a practical matter, a targeted income tax. It applies to businesses that avoid the Business Profits Tax (“BPT”) by paying out all their profits as compensation to highly-compensated principals by taxing this compensation.
By way of background, the Koch business-tax-cuts began about ten years ago. In 2015, the BPT rate was 8.5%, while the BET rate was 0.75%. By 2023, the BPT rate had been cut to 7.5%, and the BET rate to 0.55%. Last week, the House Ways and Means Committee voted along party lines to cut the BET rate from .55% to .5%.
What we’ve been told, throughout the past ten years, by the local Koch organization and the Koch Reps/Senators is that the Koch tax-cuts jump-started New Hampshire’s economy and have been fueling an economic boom. For example:
We looked into these claims. We found that, relative to these claims, the Koch business-tax-cuts have been a bust.
If the Koch business-tax-cuts actually jump-started New Hampshire’s economy and have been fueling an economic boom over the past ten years, then we should see the State’s GDP (gross domestic product) growing at a faster rate than the national GDP over that period. So let’s look at the numbers.
In 2015, New Hampshire’s GDP was approximately $79.3 billion, while in 2024, New Hampshire’s GDP was approximately $94.3 billion. In 2015, national GDP was approximately $18.3 trillion, while in 2024, national GDP was approximately $23.6 trillion. These numbers are inflation-adjusted (converted to 2017 dollars). (Sources: Statista FRED)
So over the time period in question the New Hampshire economy grew by 19%, while the national economy grew by 29%.
Another way to judge whether the Koch business-tax-cuts actually jump-started New Hampshire’s economy and have been fueling an economic boom is to compare the State’s percentage of national GDP before and after. If what we have been told is true, New Hampshire’s GDP should have grown as a percentage of the national GDP.
In 2015, New Hampshire’s GDP was .43% of the national economy. In 2024, New Hampshire’s share had fallen to .399%. In other words, over the period that business-taxes were being cut in New Hampshire, the economies of the other States, in the aggregate, grew faster than New Hampshire’s.
Indeed, while New Hampshire’s economy expanded by 19%, Massachusetts economy grew by 23% ($514.4 billion to $633.62 billion (Statista)).
To conclude, while New Hampshire’s economy has grown over the past ten years it has grown at a significantly slower pace than the national economy and has shrunk as a share of the national economy. That’s hardly what we would consider an economic boom.