Now that a judge has ruled New Hampshire state taxes must cover a larger share of K-12 education costs — at least an additional $500 million — prominent Granite State Democrats want that money to come from a hike in the state’s only income tax.

New Hampshire’s tax on interest and dividend income (I&D), used by retirees and others who rely on savings and investment revenue each month, is scheduled to be phased out by 2025. The current I&D tax rate is 5 percent and goes to 4 percent in 2024 before ending entirely on January 1, 2025. When it does, supporters of the phase-out say, the state will truly be income-tax free.

“By eliminating the Interest & Dividends Tax, we can make New Hampshire a more affordable and welcoming place for retirees and those living on a fixed income. This will also help to ensure that they can live their golden years with financial security and independence,” according to Rep. Joseph Sweeney (R- Salem).

On Nov. 20, Rockingham County Superior Court Judge David Ruoff issued his controversial ruling that state taxpayer funding of K-12 education must increase from $4,100 per pupil to $7,356.01.

At a minimum, that is an increase of $537,550,970.95 in base adequacy aid to New Hampshire Schools,” Ruoff wrote.

Almost immediately, Granite State Democrats began arguing the I&D income tax phase-out should end, reports Kevin Landrigan in the Union Leader.

“The first response from many top Democrats has been to urge the Legislature to retain the state Interest and Dividends Tax that currently is scheduled to be fully repealed by the end of 2025.”

State Sen. Cindy Rosenwald (D-Nashua) is one of them. She responded to the $530 million revenue report on X.

“Difficult given the GOP’s recent elimination of the I and D tax, paid by only 10% of Granite Staters, and tax giveaways to multinational corporations,” she wrote.

Former New Hampshire Democratic Party chair Kathy Sullivan added her own post.

“That 10% = wealthy Granite State residents with stocks, bonds, and other investment vehicles generating hundreds of thousands of dollars in income who don’t need a tax break.”

Sullivan is currently heading up the effort to get Granite State Democrats to write in President Joe Biden’s name in the First in the Nation presidential primary after Biden chose not to appear on the ballot in New Hampshire.

Fellow state Senate Democrat Becky Whitley of Hopkinton echoed the sentiment, calling the I&D income tax phase-out a “tax break to the wealthiest individuals and businesses in our state.”

Republicans argue that it is business as usual for New Hampshire Democrats, who opposed both eliminating the income tax and cuts in business taxes passed by the GOP.

“Democrats can be counted on to work to raise taxes or fight against reducing them. When they controlled the legislature in 2019-2020, they passed taxes on income, sales, and capital gains. All were vetoed by Gov. Chris Sununu,” said Ray Chadwick, chairman of Granite State Taxpayers.

“As Democrat Rahm Emanual once famously opined, ‘You never let a serious crisis go to waste.’ Now, New Hampshire Democrats want to use the recent ConVal court decision as a reason to keep the Interest & Dividends tax, which is scheduled to end in 2024.

“Our economy and prosperity rely on low and predictable taxes as an incentive to keep businesses and people moving here and staying here,” Chadwick said.

Some Democrats argue keeping the tax at its current 5 percent rate, or 2024’s 4 percent, is not a “tax increase;” it would merely keep taxes from going down. Republican counter that the tax as written is already set at zero as of 2025, so any change in the law that leaves the tax higher than zero is, by definition, a tax increase.

Rep. Dan McGuire (R-Epsom) sits on the House Finance Committee and said Democrats are trying to renege on a deal.

“The legislature voted unanimously for the budget, which included a sunset of the interest and dividends tax one year earlier than otherwise. It did not include the elimination of the communication tax which the governor wanted. This was a compromise to pay long-term for retirement enhancements the Democrats wanted.

“Now, apparently, some want to undo that compromise. Can we rethink the communication tax, too?” asks McGuire.

Drew Cline, president of the Josiah Bartlett Center for Public Policy says Democrats are ignoring the real revenue numbers since the tax cuts went into place.

“A single Superior Court decision that’s being appealed does not merit a rush to raise taxes. By the way, state revenues in the last fiscal year were $539 million over budget, and so far this year they’re $62 million over budget. There’s no need to panic.”

In 2020, Republicans used the income tax issue and Democratic efforts to fund paid leave with a payroll tax to gain legislative seats even as Democrat Biden was soundly defeating President Donald Trump in the Granite State. If Democrats take up the call to revive an income tax, even one that just impacts ten percent of the state’s taxpayers, history could repeat itself for the Granite State GOP.