New Hampshire is currently one of nine states that does not tax capital gains. A bill before the state’s General Court would add such a levy as part of a tax reform and education financing initiative.
Critics called the measure a jobs killer.
The House Finance Committee will hold its second work session Wednesday afternoon on House Bill 686. The committee received the bill after the House passed the measure 199-143 on Feb. 28, the last day for the chamber to act on legislation needing a second committee to review.
State Rep. Dick Ames, one of 10 Democratic sponsors of the bill, said during a House debate on the bill last month that adding a 5 percent capital gains tax would generate between $95 million and $150 million in state revenue based on current economic conditions.
In addition to the capital gains tax, the bill bumps personal tax exemptions from $2,400 to $5,000. Married senior couples would see their exemptions rise from $7,200 to $25,000. It also reduces the state’s property tax rate by 25 percent.
Even with the cuts, the revenue would help the state raise per pupil spending from $3,708.78 to $4,500 for the 2020 fiscal year. Funding for free-and-reduced lunch and special education programs also would increase.
Ames, a Jaffrey Democrat who is the vice chairman of the House Ways and Means Committee, said the bill addresses inequities in the state’s tax code and educational funding, noting that 80 percent of the revenue would come from taxpayers making more than $200,000 annually.
“Currently, the burden placed by New Hampshire taxation, state and local, on those with very low incomes as a proportion of their income is about four times greater than the tax burden borne by those with very high incomes,” Ames said.
Republican lawmakers countered that the bill unfairly targets job creators. They argued that New Hampshire's status as a state that eschews a capital gains tax has led to its economic success.
State Rep. Patrick Abrami, R-Rockingham, recalled his brother created a business, only to see it fail, and it ended up costing him his house, which he used for collateral. If the government wasn’t going to provide a safety net to people to protect their investment, then why should it profit when a business succeeds, he asked.
“The minority feels this is an attack on business creation and risk taking,” Abrami said. “Those who invest in business can win big and they can lose big. There are no guarantees.”