A bill proposed by eight representatives and two senators would phase out the state tax on interest and dividends over the next four years.
Currently, New Hampshire boasts that it has no income tax. Only six other states in the US have no tax on income. The only other state with both no income tax and no sales tax is Alaska.
As is often the case, however, this is more complicated than you might think.
New Hampshire’s government does not levy a tax on earned income, in the traditional sense. There is a 5% tax on interest earned and on dividends. Now, libertarian Republicans are seeking to eliminate that tax, truly making the state income-tax-free.
House Bill 568 proposes a gradual increase in the exemption of the I&D tax and then eliminates it entirely by 2025.
Many retirees surely live off of their lifelong savings. When a person draws more from their 401(k), IRA, or other investment account, it is often in the form of interest or dividends. The US government already taxes dividends just like it taxes income (except for qualified dividends), so retirees may already be paying 30% taxes on their dividends that they worked up to build up over decades. Taking an additional 5% from those who earned it is bad policy.
Please email and call your representatives and ask them to support HB568 so that we can all retire with dignity and enjoy the payoff from our hard work, diligent saving, and wise investing.
UPDATE: This bill has been retained in Committee, but the same policy has been placed into the budget. If the budget bill passes, this policy will be enacted.
UPDATE: This language was added to the budget bill, which was signed into law by Sununu.