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Thursday, April 5, 2012

NH Senate considering amendment to ban income tax

CONCORD – New Hampshire has no personal income tax, and a proposed constitutional amendment seeks to keep it that way, but questions about its potential impact on business tax rates have some senators worried.

The amendment would prohibit new taxes on a person’s income, regardless of its source.

New Hampshire is one of nine states that does not tax personal income, though it taxes interest and dividends. New Hampshire and Alaska are the only states without taxes on either personal income or sales.

The House passed the amendment in January by more than the required three-fifths vote to place it on the November ballot. To reach the ballot, it also needs a three-fifths vote in the Senate. Two-thirds of voters must approve changes to the constitution.

Its fate in the Senate is unclear, despite having powerful allies in both chambers.

Senate President Peter Bragdon raised questions at a hearing on the measure Wednesday about a possible unintended consequence that might force the state to turn to higher business taxes to pay for government if the amendment was adopted.

Bragdon, a member of the Senate Internal Affairs Committee, said afterward he was pointing out that the measure may need to be clarified.

In response to Bragdon’s questions, House Republican Leader D.J. Bettencourt, an amendment co-sponsor, said the amendment applies only to human beings, not corporations considered “persons” under the law.

Bettencourt said the amendment would only prohibit a personal income tax, but he acknowledged that could mean rates on current business taxes and other taxes could be increased.

Bragdon, R-Milford, said later he is concerned that might open the door to higher business taxes, something Republicans avoided in crafting their state budget during the recession.

Opponents argued future legislatures’ options would be unnecessarily limited by a proposal that seeks to ban something the state does not have.

“Nothing in the constitution requires an income tax,” said Cathy Silber, executive director of Granite State Priorities.

Silber and other opponents said future voters and legislatures should have the flexibility to decide tax policy according to the needs at that time.

“Let’s leave it. Leave the options open to the future,” said Helen Schotanus of Grantham.

House Finance Chairman Kenneth Weyler, R-Kingston, countered that people opposed to the amendment want to increase the size of government.

“The people who speak against this want to grow government,” he said.

New Hampshire has a long history of opposing an income tax. The House narrowly passed an income tax in 1999 during a debate over how to satisfy a state Supreme Court ruling on paying for public education, but the bill later died.

Taking an anti-income-tax pledge has been a ritual in gubernatorial elections in New Hampshire for years. Candidates who refused to vow to veto income and general sales taxes have, with one exception, been defeated.

The ritual of taking the pledge began with Gov. Wesley Powell, a Republican first elected in 1958. Republican Gov. Meldrim Thomson elevated it to a political sacrament in the 1970s with his slogan, “Ax the Tax.” For years it was political suicide for any gubernatorial candidate to even entertain the possibility of a personal income or general sales tax.

Gov. Jeanne Shaheen, a Democrat who now is a U.S. senator, refused to take the pledge when she ran successfully for re-election to a third term, but took it before winning her first two terms. Shaheen opposed an income tax, but proposed a sales tax to pay for public education. Her sales tax proposal did not pass.

Current Gov. John Lynch, a Democrat, took the pledge to veto sales and income taxes before winning his four terms.