Reduce Interest & Dividend Tax!

Jan 3, 2018 by

Reps. Ken Weyler and J.R. Hoell commented on the NH Interest & Dividends Tax in the New Hampshire Union Leader on January 1, 2018. Their comments are presented below with their permission.

Another View — Ken Weyler and J.R. Hoell: Let’s keep seniors in New Hampshire

The Union Leader front page headline said it best (“Tax plan analyzed: 89% of NH would save,” December 20) about how federal tax reform will put more money in Granite Staters’ pockets, boost our economy, and make our state even more competitive. We’re thrilled that Congress and President Trump were able to pass this important, beneficial legislation and disappointed that our delegation voted against the best interests of the constituents.

However, it’s important to remember that 89 percent is not 100 percent, and that while the vast majority of New Hampshire taxpayers will benefit, some will be negatively impacted by this law change.

Those who are most likely to see their taxes go up under this plan are individuals who deducted a substantial amount of state and local taxes (SALT) under the prior system. The new law caps that deduction at $10,000 annually, which certainly covers the majority of property taxes for our residents. Given that New Hampshire doesn’t tax wages, limiting this deduction, taking the savings and converting it into lower federal tax rates and a doubling of the personal exemption is a huge benefit to most of our taxpayers. It means that we can stop subsidizing the poor decisions of high tax states like New York, New Jersey, California, and Illinois.

The good news for low-tax states like New Hampshire is that we will benefit more than most states from this change. It will make us more competitive and an even more attractive place to live and work.

The bad news is that, for two groups of Granite Staters, losing the ability to deduct state and local taxes will make up a good deal of the 11 percent of our population who will be worse off. These two groups are individuals who work in states that tax wages (like Massachusetts,) who won’t be able to write off those income taxes, as well as individuals who derive their income from interest or dividends, largely retirees.

For those among the 106,000 who work out of state, this might be the incentive they need to come back to New Hampshire to fill the record number of open positions here. This actually makes New Hampshire employers more attractive and will benefit our economy. While we sympathize with those who are faced with higher taxes, this decision is still a good one for New Hampshire.

For those retired individuals who receive interest or dividends, the situation is far less rosy. The inability to write off the state’s interest and dividend (I&D) tax means that this deduction is now subject to federal income taxes, at a rate as high as 37 percent, meaning that what was a 5 percent tax now has the effective impact of a 6 percent tax or higher for these seniors.

One part of the SALT cap is that it forces states to become more competitive, and New Hampshire is not immune. States that do not tax I&D, like Florida, become more attractive as the Granite State looks less promising. Moreover, should a retiree own homes in Florida and New Hampshire, they can simply choose to become a resident of Florida, by spending just over six months there, and immediately stop paying any I&D tax.

If this sounds farfetched, it’s already happening. A former colleague of ours, Will Smith, who was a vice-chairman of House Finance, did just this.

He now spends just over six months each year in Florida and pays no I&D tax. Other seniors who can’t afford two homes will simply leave the state for good, taking away the vibrancy they bring to our communities over poor tax policy.

While we both favor phasing out the I&D tax and strengthening the New Hampshire Advantage, we believe we should immediately start by undoing the impact of the new burden on our seniors by not being able to deduct I&D tax. We would immediately reduce that tax from 5 percent to 4 percent to protect seniors and to keep them here in New Hampshire.

Accordingly, we will move to amend House Bill 529, which initially sought to repeal the I&D tax, on the House floor to reduce the I&D tax rate by 1 percent. This will offset the higher taxes seniors will pay as a result of federal tax reform.

Making this change will benefit New Hampshire seniors and keep some of our precious treasures in the Granite State to benefit all of us.

Rep. Ken Weyler, R-Kingston is a vice-chairman of the House Finance Committee. Rep. J.R. Hoell, R-Dunbarton, is a founding member of the New Hampshire House Freedom Caucus.

Click here to link to the Union Leader article.

Granite State Taxpayers is New Hampshire’s oldest statewide taxpayer association. Founded in 1990 by former Governor Mel Thomson and former State Senator George Lovejoy, our mission is to inform, educate and motivate New Hampshire taxpayers and to influence the legislature on their behalf.

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