CONCORD — A last-minute amendment to create a new tax on annual incomes above $132,900 was presented, discussed and unanimously rejected by the six-member Senate Finance Committee on Tuesday, all in about an hour.
The amendment to an unrelated House bill was co-sponsored by Democratic state Sens. Jeanne Dietsch of Peterborough and Martha Fuller Clark of Portsmouth, along with Democratic Rep. Tom Schamberg of Wilmot.
Dietsch presented the bill as a way to address the funding crisis facing many school districts in the state’s property poor communities, which she said is placing a crushing burden on local property tax payers.
The proposal called for a payroll deduction on high earners in order to reduce the Statewide Education Property Tax (SWEPT), collected locally but turned over to the state to help pay the state share of education funding.
Dietsch said reliance on SWEPT has put too much pressure on property taxes to fund education.
“As I sat in the Senate public budget hearing last week, listening to stories of schools closing and taxpayers fleeing property-poor towns, it’s clear we’ve SWEPT our kids’ and property taxpayers’ needs under the rug for too long,” she said.
“This approach would make a dramatic difference in towns’ ability to balance the needs of schools and taxpayers’ ability to pay.”
All wage earners currently pay 6.2% on income up to $132,900 into Social Security. Wages above $132,900 are exempt from the Social Security (FICA) tax.
The amendment proposed by Dietsch and others would continue the 6.2% withholding on wages above $132,900, with the proceeds going mostly to reducing the statewide property tax by more than half.
The tax would only affect the 6% of wage earners in the state who make more than $132,900 per year, the Social Security maximum taxable amount for 2019.
According to the state Department of Revenue Administration, the new tax could bring in more than $300 million in revenues to the state from 42,000 wage-earners. “The 600,000-plus New Hampshire employees who earn less than the cap would pay nothing,” said Dietsch.
Several speakers in support of the bill used it as an opportunity to remind lawmakers of the desperate situation facing many of the state’s school districts, but Democrats and Republicans were unconvinced.
While the underlying House bill on use of mobile phones while driving will go to the Senate floor, it will not contain the Dietsch amendment.
“While I am committed to ensuring New Hampshire has the resources necessary to provide meaningful property tax relief and increase state education funding, I believe there are much better avenues to get there,” said Senate Majority Leader Dan Feltes, D-Concord. “This is an income tax, which I oppose.”
Dietsch apologized for presenting the amendment at such a late point in the legislative calendar, saying she was motivated by the recent testimony at Senate budget hearings. Republicans called the timing “bizarre.”
“This is a broad-based tax that will affect a high number of households in New Hampshire,” said House Minority Leader Dick Hinch, R-Merrimack.
“A sizable portion of our population chose to live here because of our lack of an income tax. This proposal would fundamentally and negatively affect our state’s personal tax environment, and to have this come forward via a non-germane amendment is bizarre at best.”