How New Hampshire Poaches Massachusetts Businesses

A fascinating account in today’s Boston Globe about how New Hampshire poaches Massachusetts businesses:

New Hampshire pays Michael Bergeron to be a full-time thief, sending him across the border in an unmarked black sedan to poach Massachusetts companies.

To help keep his missions undercover, the business recruiter even scraped the New Hampshire state seal off his Ford Fusion. Equal parts real estate agent, financial adviser, and deal fixer, Bergeron has lured dozens of Massachusetts companies to the Granite State over the past few years with promises of lower tax bills, cheaper office and industrial space, and fewer regulations.

John Hancock Financial and Liberty Mutual Group are among the high-profile firms that recently moved significant parts of their operations over the state line – partially because of Bergeron’s pitches. And an increasing number of small and midsize firms are considering migrating as a way to reduce costs in uncertain economic times.

“New Hampshire has become an easier place to do business as Massachusetts has become more difficult,’’ said Bergeron, who works as a business development manager for the New Hampshire Department of Resources and Economic Development. “It’s a lower cost to do business here and you still have the availability of the skilled workforce in Massachusetts.’’

His PowerPoint presentations highlight what New Hampshire officials say is Massachusetts’ bad-business reputation. They cite expensive real estate, drawn-out permitting processes, and higher taxes.

There are no official statistics from Massachusetts or New Hampshire on the number of companies that have moved north. But Bergeron estimates that at least 5,000 new jobs have been created over the past five years as a result of Massachusetts businesses moving to his state.

Massachusetts officials and business leaders deny that a mass exodus is underway, although they acknowledge that New Hampshire’s aggressive recruitment tactics can’t be ignored.

Question 3 in Massachusetts

The Union Leader (UL) ran a story today about the effects of Question 3 in Massachusetts.  Question 3 would reduce the Bay state’s sales tax to 3 percent from 6.25 percent.  The UL story predominantly centered around the reduction in cross-border shopping from Massachusetts to New Hampshire.

However, I’m surprised no one in the story mentioned the real problem with the sales tax–it is a tax on investment.  For instance, a hammer can be used by an individual or a business.  To the individual its consumption, but for the business its an investment.  For more on this issue see this important study by the folks at the Council on State Taxation.

Therefore, a lower sales tax in the Bay state will mean more of their entrepreneurs can stay home rather than jumping over the border.  In fact, the Beacon Hill Institute found (pdf) that Question 3 would increase private sector employment in the Bay state by over 27,000 due, in part, to higher investment.

So, while losing cross-border shoppers will certainly hurt in the short-run; losing cross-border entrepreneurs will hurt New Hampshire a lot more in the long-run.  Regardless of what happens to Question 3, New Hampshire must first-and-foremost remain vigilant against adopting a sales tax.