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Senate Republicans stand between the New Hampshire Advantage and dangerous judicial overreach in the ConVal decision that could force an income tax on Granite Staters, said Senate President Jeb Bradley (R-Wolfeboro).

Speaking before the Senate’s first session of the year at a Wednesday press conference in the Legislative Office Building, Bardley said the ConVal education funding decision essentially forces $536 million in new spending.

“There is no way, in my opinion, to do that without an income tax, or a sales tax or, possibly, both,” Bradley said. “That totally undermines the New Hampshire Advantage, and we just can’t go that route.”

Rockingham Superior Court Judge David Ruoff sided with the Contoocook Valley School District in its lawsuit against the state, ruling New Hampshire’s education funding system does not pay enough in adequacy grants and is, therefore, in violation of the state constitution. The Claremont state Supreme Court decisions from the 1990s found students have a right to an adequate education. That put the onus on lawmakers to define how much an adequate education costs and to come up with a fair way to fund it.

Ruoff’s decision, released in November, found the current adequacy grant of about $4,100 per pupil is too low and ought to be at least $7,300 per pupil. Ruoff left the final amount and funding mechanism up to the legislature. But Bradley said Ruoff’s decision puts New Hampshire on the road to an income tax. 

Worse, according to Bradley, it would force New Hampshire to revert to a donor town-type funding system where property taxes paid by homeowners in wealthier communities would be transferred to school systems in less-affluent cities or towns. That won’t happen while the GOP maintains control of the Senate, Bradley pledged.

“Between the 14 of us, an income tax, a sales tax, and donor towns are off the table,” Bradley said.

Some Democrats have already floated the idea of blocking the phase-out of the state’s tax on interest and dividends tax. Republicans say it’s just one step toward the longstanding goal of Granite State progressives to impose an income tax in the name of equity and social justice.

Gov. Chris Sununu is appealing Ruoff’s order to the New Hampshire Supreme Court. Bradley said it remains to be seen if the ConVal decision survives the appeal. 

Protecting New Hampshire’s strong economy and free way of life from a tax regime is one of the Senate GOP’s top priorities for the coming session, Bradley said.

“It’s vitally important that we protect hardworking men and women from higher taxes, allow small businesses to thrive, and maintain our economic status,” Bradley said.

Public safety is the second pillar of the Senate GOP’s agenda, he said, and that starts with bail reform. The House and Senate have competing proposals to fix the 2018 bail reform law. While it was supposed to end cash bail for non-violent offenders, it’s now blamed for returning violent criminals to the streets.

“Our bail system, with the best intentions several years ago, was reformed, and those reforms did not protect the public,” Bradley said.

Despite differences in the proposals, Bradley said he is optimistic a deal can be struck between the two chambers to fix the bail system one way or another. 

“I think the House has made a good faith effort,” Bradley said. “Nobody gets everything they want around here.”

The Senate is also looking to block sanctuary cities in New Hampshire, strengthen protections at the Northern Border, and pass mandatory minimum sentences for fentanyl traffickers, said Sen. Sharon Carson (R-Londonderry). 

The GOP agenda includes a parental transparency proposal that guarantees guardians access to school information about their children, a hotly-contested issue as some school districts insist teachers and administrators have the right to keep secrets – or even lie to – parents about their children’s behavior.

The senators will also push for local property tax relief, improvements to health care and mental health care, clean drinking water, investments in affordable housing, and a constitutional amendment to enshrine New Hampshire’s First in the Nation presidential primary into law. 

While the senators presented a united front for their agenda, there is a major fault line when it comes to marijuana legalization. Sununu reversed course last year by calling for the legislature to legalize recreational marijuana. Bradley admits the issue divides his caucus, but there will be a legalization effort this year he hopes everyone can agree to.

“There is the opportunity to get that done, but we’ll see what happens,” Bradley said.

With the tax filing deadline fast approaching, a new analysis finds New Hampshire residents have the lowest tax burden in New England and one of the lowest nationally.

Meanwhile, just across the line in Massachusetts, soaring taxes on top earners are sending them fleeing to low-tax states like Florida and, yes, New Hampshire.

The new WalletHub analysis uses a metric of income taxes, sales taxes, and property taxes to calculate overall tax burdens. New Hampshire has the third lowest overall tax burden, trailing just Alaska and Delaware. New Hampshire’s performance is even more impressive when compared to other states in the region. Three of the five states with the highest tax burden are in New England (Maine, Vermont, and Rhode Island).

New Hampshire is the only New England state not in the top 20 for tax burden.

State Senate Finance Committee Chairman James Gray (R-Rochester) said New Hampshire’s low taxes and efficient government are some of the reasons for the state’s economic success. “There’s an awful lot of people who choose New Hampshire because we are fiscally responsible with our money,” Gray said.

A different Wallethub analysis last week ranked New Hampshire number one for taxpayer return on investment.

The one glaring exception was property taxes. Granite State homeowners have the third highest property tax burden in the country, according to WalletHub, behind Maine and Vermont.

Gray said New Hampshire’s reliance on property tax to pay for services like education gives voters the most control over their money possible. He said that local control likely results in lower spending and taxes than if the decisions were all made in Concord.

“You have to have something to run a government by, and a lot of the things that we fund, especially schools, we pay for through a property tax,” Gray said. 

The effects of New Hampshire’s low taxes and efficient spending don’t end at the border. A new report from the Massachusetts Society of CPAs on the impact of the Bay State’s new “millionaire’s tax” — which raises the top state income tax rate to nine percent — says 82 percent of CPAs report they have high-income clients seriously considering relocating in the next 12 months. 

And tax-free New Hampshire is near the top of their list of potential destinations.

“Florida and New Hampshire are overwhelmingly the most popular choices for relocation,” the CPA report states. “While some may argue that a move to Florida is driven by a desire for better weather and a different lifestyle, the fact that the second most popular destination is New Hampshire suggests that people want to stay in the area but may be motivated instead by a lower cost of living, including a lower tax burden.

“Furthermore, New Hampshire is set to repeal its Interest and Dividends Tax by 2026, which would decide to relocate even more appealing.”

Granite State Democrats tried but failed to push through legislation reversing the repeal of the interest and dividends tax for people earning $50,000 or more per year.

New Hampshire already has the strongest economy in New England, with low unemployment and low poverty rates. The Live Free or Die state’s commitment to low taxes will help it stay in the pole position, according to Joseph Krupka, an accounting professor at Florida State University.

“Here is a simple answer, the lower state tax burden will drive the state economy. Corporations seek state tax incentives when developing long-term strategies for where to locate new facilities such as plants and offices,” Krupka said. “Reduced corporation and real estate tax burdens along with a favorable personal income tax for their employees are the two keys.”

Gray knows there are a lot of factors considered by business owners who want to relocate, from infrastructure and energy costs to the local labor supply. Some states even offer financial incentives that New Hampshire does not currently match. But, he said, New Hampshire will keep to its low-tax structure.

“That’s just the way we do it,” Gray said. 

Political strategists see it as the third rail of New Hampshire politics, but some Granite State Democrats just can’t seem to let it go: A state income tax.

In a recent interview with the Keene Sentinel, Peterborough Democrats Jonah Wheeler and Rep. Peter Leishman both said they could support a broad-based income tax to shift the burden of education funding away from property taxes. 

“Wheeler said that to further boost public-education funding, he believes a new source of revenue is needed in the form of an income tax, which he said would simultaneously take the burden off property taxpayers,” according to the paper. “Leishman said he would support that kind of legislation and has voted in favor of it in the past.”

They aren’t alone.

During an October 2022 podcast interview, Claremont Republican-turned-Democrat state Senate candidate Charlene Lovett said she was “open to looking at” a shift to an income tax as well. During the interview, she discussed her Citizens Count survey declaration that she is  “undecided” on the idea of a broad-based income tax and the backlash that answer inspired.

But rather than taking a clear anti-income tax stance, she said it is an option that should be discussed.

“We’ve gotta deal with the fact we have an over-reliance on property taxes and it’s hurting people,” Lovett said in the podcast. “I think we have to look at that.” 

Lovett said her openness to considering an income tax is based on hearing from people financially burdened by property taxes during her years as mayor of Claremont. It has the highest property tax rate in the state.

While Lovett is trying to thread a political needle on the income tax, other Democrats are more open about embracing broad-based taxes — or at least on ruling them out.

Rep. Debra Altschiller (D-Stratham), who is running for the District 24 Senate seat being vacated by Tom Sherman, is one of many Democrats who voted against last year’s House constitutional amendment to ban income taxes. Joining Altschiller in that vote were Reps. Steve Shurtleff (D-Concord) and Matt Wilhelm (D-Manchester), currently locked in a battle for their party’s leadership.

Neither Shurtleff nor Wilhelm responded to an NH Journal question about whether they plan to support an income tax if they become House Speaker or House Minority Leader.

The amendment to ban income taxes garnered a majority vote but died because it failed to get the necessary three-fifths majority.

Rep. Eric Gallager (D-Concord) has long been vocal about his support for taxing Granite Stater’s income, but he seems to understand the political reality for Democrats.

“I can call for one because I’m in a safe D seat running unopposed,” Gallager said recently on Twitter. “But if I ever ran for governor I’d have to stop, which is one of the major reasons why I don’t ever think I’ll do so.”

Gallager’s sense of his political future aside, no Democratic gubernatorial candidate in recent memory has supported an income tax. Current Democratic standard bearer Sherman (D-Rye) has been vocal in rejecting income taxes and sales taxes in his faltering campaign against Gov. Chris Sununu.

“I will veto an income tax or sales tax if it comes across my desk,” Sherman told the Pulse of NH.

But Sherman did back a mandatory paid family medical leave plan passed by the Democratic legislature in 2019, which was paid for by a mandatory payment based on wages. Republicans argue that is an income tax (it is actually a payroll tax), but Democrats still continue to trip over the issue.

During a recent candidate forum in the District 1 Senate race, Rep. Edith Tucker (D-Randolph) tried to explain her vote for the paid leave plan and its funding mechanism.

“It’s not an income tax,” she insisted. “It’s a tax taken for a particular purpose from your paycheck.”

Granite State voters may not see the distinction.

New Hampshire politicians from the State House to the US Senate have lined up against the expansion of internet sales taxes ahead of a Supreme Court hearing later this month that could end the current sales-tax status quo.

Gov. Chris Sununu and NH Attorney General Gordon MacDonald submitted an amicus brief in the case of South Dakota v. Wayfair, to be heard by the Supreme Court on April 17th. New Hampshire’s entire congressional delegation has also urged the court not to force small businesses in sales-tax-free New Hampshire to collect taxes on behalf of other states.

“It is unacceptable that New Hampshire businesses may be forced to act as tax collectors for other states. We will not sit idly by while Washington, D.C., and sales-tax-reliant states try to raid the pockets of Granite Staters and increase the price of retail goods in New Hampshire,” Sununu said. “That is the very definition of taxation without representation, and we will not stand for it.”

Pro-free-market groups like FreedomWorks, The Institute for Policy Innovation and Americans for Prosperity have also filed an amicus brief on behalf of online retailer Wayfair and its fight to avoid collecting taxes for states where it has no “physical presence”–the standard set by the Supreme Court 26 years ago in the Quill decision.

(Click here for an excellent analysis of the legal issues raised by the Quill decision)

Anti-internet-sale-tax advocates may be facing an uphill battle, however. New Hampshire is just one of five states with no sales tax. The state of South Dakota argues that their lawsuit is necessary to “save Main Street,” an argument that appears to resonate with President Trump–particularly in his current political battles with Jeff Bezos and Amazon.com.

Court watcher Eugene Volokh also points to a previous opinion from Justice Anthony Kennedy, widely viewed as the swing vote on the court, on the issue of states and tax collection for clues on how he might rule:

What can states do in order to collect sales and use taxes on Internet and direct mail transactions, where the seller is outside the state but the buyer is inside? And Justice Anthony Kennedy’s concurring opinion signals that — when the substantive issue comes before him — the answer would be “a lot”: he would reverse Supreme Court precedent that generally bars states from collecting such taxes from the out-of-state sellers. (emphasis added)

And the court’s newest member, Justice Neil Gorsuch, has also been critical of the Quill precedent, writing that “internet retailers don’t seek comparable treatment to their brick and mortar rivals, they seek more favorable treatment, a competitive advantage.”

In the end, it may all be about the Benjamins.  Americans spent almost $120 billion online last year, and the 45 states with sales taxes claim they could collect around $26 billion a year in taxes on online and direct-marketing sales. There will be a lot of pressure on the Court to give states access to all that out-of-state cash.