Taxes

Is New Hampshire really cheaper than Vermont?

Some guidebooks consider New Hampshire, which lacks a sales or income tax, one of America's last havens. Similarly, they describe Vermont, which has both an income and a sales tax, as a high-tariff state. "Taxes are twice as high [in Vermont] as in neighboring New Hampshire, but services fall far short of being twice as good," writes Peter Dickinson in his book, "Retirement Havens Outside the Sunbelt."

Upon closer inspection, however, the tax picture isn't quite so straightforward. Style of living, investments and the geography of the Upper Valley greatly influence an individual's tax bill.

Property taxes: Those in Vermont (except for Norwich) are generally lower than in New Hampshire. Granite State residents shoulder the nation's third-highest property-tax burden. Vermont is in eighth place.

Sales tax: Vermont's is four percent, but it is not a major burden for Upper Valley residents; most of the region's shopping centers are situated on the other side of the connecticut. New Hampshire levies no tax.

State income taxes: Without taking into account some adjustments, Vermonters generally pay 25 percent of their federal tax liability to the state. The law applies to residents of other states who are employed in Vermont. New Hampshire has no income tax.

Tax on interest and dividends: New Hampshire taxes at a flat rate of five percent. Bonds issued by the state or by a New Hampshire town, direct obligations of the federal government, and interest from banks in New Hampshire and Vermont are exempt. There are also personal exemptions and exemptions for the blind and disabled. Vermont does not tax interest and dividends separately.

Car taxes: Two of New Hampshire's best-kept tax secrets are the automobile registration fees paid to the towns and the state. Annual fees are based on a car's list price, weight and age. Registering a 1988-model, $10,000 mid-sized car costs about $220. Although the fees decline as the car gets older, New Hampshire motorists pay between two and three times more in registration fees over the life of a car than their Vermont counterparts do. They pay a onetime sales tax and an annual flat fee of $36.

Compared with most states, Vermont is something of a bargain, maintains William Hamilton, a senior vice president at Dartmouth National Bank. Unless you are a wage earner making more than $100,000, the tax difference between Vermont and New Hampshire is minimal. In one area of taxation, both states are equal only you won't be around to enjoy the benefit. Neither state collects estate taxes. Hamilton advises alumni who relocate. from out-ofstate to take advantage of the local probate laws and set up an "inter vivos," or living trust.

Freelance writers Eric Lip ton and Nicholas Boke, former Whitney Campbell intern Timothy J. Burger '88 and managing editor Lee Michaelides contributed to this article.