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McQuiston: Tax policy perspective

06/22/09 5:55PM By Timothy McQuiston
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(HOST) Commentator Timothy McQuiston suggests that when you hear politicians talking about taxes, it isn't so much about fairness, it's about jobs.

(McQUISTON) Tax policy is all in your perspective, it seems to me. While the Legislature has focused on the property tax and the direct impact it has on local constituencies, governors have generally looked at the bigger picture and the income tax.

In the latest, harrowing row over the state budget, which resulted in the first-ever budget veto, the Legislature cut the income tax, albeit slightly, for anyone making under 200,000 dollars and raised it for everyone else.

Governor Douglas proposed lowering the highest marginal rate for income over 375,000 from 9.5 percent to 9 percent - and you might well be wondering, "Why?"

Well, take the case of golfer Tiger Woods. Tiger's participation in the US Open at Bethpage Black in New York State, means that he will have to pay New York state income tax on whatever prize money he wins. But Tiger officially lives in income tax free Florida. So if he has to pay income tax where he earns it, why not live in his home state of California? Because Florida, like New Hampshire, is tax free for earned income. Tiger makes a bundle on the PGA tour, but most of his income comes from endorsements and other non-prize money sources - video games, golf equipment, clothing deals. Heck, Tiger could live in New Hampshire. All he'd need to do is stick around for six months and one day in the Granite State. But I suppose the Sunshine State offers more opportunities to work on your game.

In Vermont terms, what Governor Douglas and his predecessors have been concerned about, is that business owners and other top managers make decisions about where to locate or expand a business in part on how it affects their own wallets. And if they move their business out of state, jobs go with it.

If your adjusted gross income is one million dollars, you're going to pay $51,000 in Vermont taxes. If your income is 100,000 - still a nice income - your tax will be only a little over 3,000. But if you move your company over to New Hampshire, you've essentially given yourself and your employees a nice raise without having to increase payroll one penny.

It makes you happier; it makes your employees happier; and it makes the State of New Hampshire happier. In recent years, both Howard Dean and Jim Douglas have fought the Legislature over the income tax for these very reasons.

It's clear that many business owners are willing to pay more to live here - sometimes a lot more. Others have no choice because of the nature of their business and they either like it or lump it. But make no mistake - the lure of "tax free" is very real.
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