Average wage earners who move to New Hampshire from a higher-tax state would see their tax obligations shrink by as much as $6,615, according to a new study of state tax burdens.
The analysis published this month by HireAHelper.com, a website that links people to moving services nationwide, found that New Hampshire has the 11th lowest dollar-for-dollar tax burden among the 50 states and Washington, D.C. The study’s aim is to inform those planning interstate moves about potential changes to their tax obligations and help them better determine whether such a move is worthwhile, according to the study’s author, Elyssa Kirkham.
The HireAHelper analysis examined three of the most common taxes that generate the most revenues for states: income, real estate and sales taxes. The District of Columbia posted the highest annual tax burden at $9,730, while Tennessee had the lowest dollar-for-dollar average tax obligations: $1,970.
Although Americans planning moves do look at their future salaries, the overall cost of living, rent and housing payments, they may not think about changes to tax levies when moving from state to state, Kirkham said.
“Including that in the consideration kind of gives them a more complete picture,” she said.
New Hampshire is unusual because it has no state tax on payroll earnings and no state-level sales tax, although New Hampshire does tax dividend and interest income.
“That is how it ranked so well even though it had some of the highest property taxes we looked at,” Kirkham said.
In fact, New Hampshire posted the third-highest per-capita property tax burden in the nation, behind Washington, D.C., and New Jersey, according to the HireAHelper report.
Mobile workers would do well by considering state tax levies when moving to or from New Hampshire, according to Kirkham. Those moving out of state would likely have to weigh the prospect of paying sales and income taxes elsewhere, she said, and those moving to New Hampshire might need to consider the property tax rate.
“In moving to New Hampshire, the equation would be different if you’re a renter as opposed to buying a home,” Kirkham said.
New Hampshire also fares well when the average tax burden is examined as a percentage of income, according to the study. On that score, the state residents’ incomes ranked ninth highest in the nation when compared to tax burdens, with average earners paying 6.1 percent of their earnings in state and local taxes.
State tax structures can also encourage or discourage entrepreneurs and businesses looking to relocate across state lines, according to Kirkham, but experts say tax burdens are one of many factors that go into what becomes a complex equation.
“Without commenting on the specific accuracy of the specific tax ranking, it is generally true that New Hampshire is a low-tax state,” Michael Ettlinger, director of the Carsey School of Public Policy at the University of New Hampshire, said in an email. “In terms of whether that attracts skilled workers, it is a complicated question.”
Among the factors that a worker may consider when relocating are employment opportunities, family ties, the quality of public education, public safety, recreational options and after-tax compensation, according to Ettlinger.
The picture is just as complicated when businesses consider moves to other states, he said, adding that some of the business considerations involve access to markets and suppliers, the transportation system, quality of the workforce and the price of energy.
“Level of taxation is typically on the list but, in the surveys I recall, not particularly high,” Ettlinger said.
In addition, tax burdens can vary significantly in a low-tax or a high-tax state based on individual circumstances, he said. And states with widely different tax structures can produce equally positive economic results, according to Ettlinger.
“Evidence of the complexity can be found in the fact that we have skilled workers and businesses thriving in states as different as California (higher top income tax rate, property tax limits) and New Hampshire (no income tax on earned income, higher property taxes),” he said.
In fact, New Hampshire’s economy has been outpacing other New England states in several respects, according to data from the Federal Reserve Bank of Boston. As of February, the state posted the highest employment increases in the region based on year-over-year figures, and its annual wage growth in the first quarter was also the highest in New England at 5.8 percent.