Concord serves up plenty to be ‘grumpy’ about
An observer of the New Hampshire Legislature recently commented after a day at the State House that the solons seemed "grumpy." Given the events of the last couple weeks, it appears they have plenty to be grumpy about!While things may have changed by the time you read this, on May 12 the House passed its version of a budget fix to address the state deficit, now estimated to be as high as $300 million. This package, fashioned by the Finance Committee, immediately was subject to the same criticisms leveled at last year’s budget process.Among the criticisms was the claim that a number of revenue-raising measures were inserted without any public hearings. Also, a major criticism was that the package merely postponed the inevitable need to address New Hampshire’s revenue sources as a whole and overall spending levels. The House-passed package included a repeal of last year’s controversial "LLC tax," and it contained some one-time measures, variously accused of being "tricks" or "gimmicks," including a $25 million payment by the University System of New Hampshire to be replaced by bonding and a refinancing of other bond debt which lessened immediate payment requirements. The package also included increases in several taxes, including an estate tax. This would reinstitute a tax on estates of New Hampshire residents who die, putting an eight percent tax on estates over $2 million. It would apply only to the estate of the second spouse to die and other unmarried persons. While on the surface this looks like a rather innocuous measure, those in the estate planning and tax business quickly pointed out possible unintended consequences. First, while some might find it surprising, there are many estates over $2 million. Further, those who have such estates often have second homes in other states, notably Florida. Like New Hampshire at present, Florida has no estate tax. New Hampshire’s adoption of such a tax undoubtedly would motivate many with dual residence to claim Florida residency.Not only would this deprive New Hampshire of the estate tax when they die, it would also deprive us of interest and dividends tax and other taxes paid by these people as a result of their New Hampshire residency. All of this could be pointed out in public hearings, of course, but there were none.Also on the estate tax front, the federal situation at present is unpredictable. On Jan. 1, the federal estate tax automatically was repealed, due to the provisions of the 2001 Tax Reform Act. Prior to the repeal, each individual had a $3.5 million tax exemption, which meant a family did not face federal estate tax on $7 million of assets, if estates were planned correctly.However, the estate tax is scheduled to reappear on Jan. 1, 2011, at the 2001 rates, which are a $1 million tax exemption for each person or $2 million per couple. Estate planning professionals at present have a hard time advising clients, and the New Hampshire threat of reinstitution of an estate tax makes their job more complex. Add to all this the assumption that Congress will address the issue prior to the end of 2010, and the waters become even murkier.***** The "grumpy factor" in the State House was exacerbated by matters surrounding the Financial Resources Mortgage company failure and resulting finger-pointing. State securities regulator Mark Connolly resigned his position and placed responsibility with the attorney general and banking commissioner. The banking commissioner asked everyone to await a report by Attorney General Michael Delaney, and that report was issued May 12, pointing out failures in the Banking Department, Attorney General’s Office and Securities Bureau, but not finding any cover-up. Governor Lynch accepted responsibility as Chief Executive and expressed his disappointment in how the situation was handled.***** Further, public officials were rendered even more grumpy with a report by Attorney General Delaney into the actions of Liquor Commission Chief Mark Bodi and Rep. Daniel Eaton, D-Stoddard. Delaney said that while no criminal charges were in order, he was going to start removal proceedings against Bodi based on his investigation of a complaint about Bodi and Representative Eaton, which involved allegations that the two interfered with an enforcement action investigators took about the events involving a Keene bar. Bodi’s attorney, former New Hampshire Attorney General Philip McLaughlin, indicated Bodi would not resign, and observers questioned whether the standard being applied is one of perfection rather than a more reasonable one for public officials. Brad Cook is a shareholder in the Manchester law firm of Sheehan Phinney Bass + Green and heads its government relations and estate planning groups. He also serves as secretary of the Business and Industry Association of New Hampshire.