GOP pushing dividend tax cut in State House
CONCORD — A bill to exempt more interest and dividend income from taxation has cleared the Senate and is making its way to the House.
Supporters of the measure describe it as a tax break for the middle class, while opponents say the proposal mostly benefits New Hampshire’s wealthiest households.
Senate Bill 244 would increase the Interest and Dividends Tax exemption from $2,400 for individuals to $10,000. For those who file jointly, it would go from $4,800 to $20,000.
It’s a significant tax break for those who derive income from interest and dividends.
“This legislation has the greatest effect on our retirees and those living on a fixed income,” said its prime sponsor, Sen. Andy Sanborn, R-Bedford. “It will provide tax relief to our state’s low- and middle-class residents on fixed-incomes, allowing them to keep more of their hard-earned money and reduce the tax burden on New Hampshire families.”
Sen. Dan Feltes, D-Concord, voted with his seven fellow Democrats against the measure when the Senate passed it 13-8 late in last Thursday’s session. He sent the bill to the Institute for Taxation and Economic Policy, a nonprofit, nonpartisan think tank that works on state and federal tax policy issues, according to the institute’s website.
“They looked at New Hampshire tax returns, and they concluded that 68 percent of the benefit of this tax cut will go to the wealthiest 20 percent in the state,” he said. “My view is we ought to be cutting taxes for working families, not doing even more tax cuts for the wealthiest.”
Sanborn initially proposed increasing the exemptions to $25,000 for individuals and $50,000 for families. The initial fiscal note estimated a loss of $31 million in the first year of the tax cut, based on the receipts from the Income and Dividends Tax in 2015.
“It was too much for some, so in the art of compromise, which is politics, I brought it down,” Sanborn said.
The official fiscal note on the new version of the bill has yet to be published, but John Beardmore, commissioner of the Department of Revenue Administration, has already run some numbers. He estimates the impact of the bill as it now stands at $15.7 million less revenue.
According to Beardmore, the state collected $82.7 million through the Interest and Dividends Tax from 44,641 tax filers in 2015.
In order to collect $82.7 million, you’d have to apply the tax rate of 5 percent to a total of $1.65 billion in interest and dividend income.
So if 44,641 tax returns accounted for $1.65 billion, that averages out to about $37,000 in interest and dividend income per filer.
Does $37,000 in interest and dividends make you a rich person (with some claiming a lot less and some claiming a lot more)? Sanborn says “no.”
“This is an exemption for the lowest tier of people, so it’s helping those who don’t have a lot of interest and dividends. This is specifically targeting the elderly and those on a fixed income,” he said.
Feltes said he finds Sanborn’s professed interest in the elderly ironic, since the bill eliminates an additional tax exemption for the elderly, disabled and blind, which has been $1,200 more than what everyone else gets.
Most of the benefit of the higher exemption will go to business owners who derive dividend payments from their ownership shares, not the elderly who have savings accounts, Feltes said.
“You have to have a lot of stuff in your savings account at 2 percent to make that kind of money,” he said.
Democratic Majority Leader Jeff Woodburn, D-Whitefield, said the state can’t afford to take a $15 million hit to benefit such a small portion of the population.
“This is part of an ongoing strategy to cut government and reward those who are already doing the best in our economy,” he said.
The bill has one more obstacle to clear before heading to the House. It will need a positive vote from the six-member Senate Finance Committee today. The four Republican committee members already voted in favor of the bill on the Senate floor.