New Hampshire Senate panel puts an end to tax on higher-wage earners

Finance Committee unanimously votes down amendment

The New Hampshire Senate Finance Committee first tried to ignore a proposal to tax higher-income wage earners to provide property tax relief, and then unanimously rejected it Tuesday without debate.

The proposal, introduced by Sen. Jeanne Dietsch, D-Peterborough, as a last-minute amendment to a bill dealing with driving while using a cell phones, would have imposed a 6.2% payroll tax on income above the $132,900 Social Security tax cap, the same amount that workers pay below that threshold to the federal government.

The first $200 million raised would go to the education trust fund, relieving property owners of 55% of their obligation under the statewide property tax, said Dietsch. The rest would be deposited in the general fund, though Dietsch – testifying at a special public hearing on the amendment – said she was open to eliminate the section of what to do with the funds.

What was important was to “add a relatively stable revenue to the state. This closes the loophole in the Social Security tax, to continue it to higher earners even past the cap.”

The tax would raise $313 million from the top 32,000 wage earners – about 6% of the population, Dietsch said.

Dietsch did find some support among a few House members.

“Our towns have just hit the breaking point in relying on the property tax,” said Rep. Sally Fellows, D-Holderness.

“We need a consistent and stable source of revenue,” said Rep. Kat McGhee, D-Hollis, adding that “courage” was needed to fill the educational funding gap.

But businesses groups and Republicans came out solidly against the bill.

David Juvet, senior vice president of the Business and Industry Association of New Hampshire, earlier told NH Business Review that his organization flatly opposes an income tax. He was more nuanced in his testimony, raising points about whether the tax would apply to partners, which also have to pay the Social Security tax, and complaining about how the bill does not spell out how to collect it. He also said if the bill were introduced, it should be done as a separate bill next year, not a non-germane amendment.

Bruce Berke, president of the state chapter of the National Federation of Independent Business, didn’t even bother to sit down before his testimony. “We are opposed to the timing of this and the cost,” he said.

“First and foremost, this is an income tax,” said Sen. Chuck Morse, R-Salem, who noted that the tax rate was higher – at least for higher-wage earners – than Massachusetts’s income tax rate of 5.1%. “We are trying to attract more people to New Hampshire and now you are telling these folks to go find another state.”

Morse also said that Governor Sununu would veto the amended bill. Sununu did go on record as opposing the amendment during the hearing, though did not speak.

In the session following the hearing, the committee’s chair, Sen. Lou D’Alessandro, D-Manchester, told his committee that it did not have to vote on the amendment –an unusual move. The committee then proceeded to pass the cell phone bill without it.

“They voted on the bill and ignored my amendment,” Dietsch later complained to reporters.

When pressed, D’Allesandro first said that the committee did vote against it 6-0, but the Senate clerk confirmed that no such vote was taken. After a break, D’Alessandro took up a vote on the amendment, he said, to clear up any confusion.

The committee voted to kill the amendment via a voice vote.

Later, Senate Majority Leader Dan Feltes, D-Concord, said in a statement to a NH Business Review inquiry, “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. This is an income tax, which I oppose.”