A bill in the state legislature that would create a tax loophole and decrease state revenues by millions recently slipped through the NH House. Although there was a request for a floor debate on HB 1686, the request was denied and the bill was marshalled through. While honest and thoughtful discussion was not allowed, legislation that puts undue pressure on local property taxes needs to be brought to light. I am writing today to share my prepared remarks regarding HB 1686 with you, the taxpaying citizens of NH:
HB 1686 broadens the Education Tax Credit (ETC) program beyond businesses to allow individual interest and dividends (I&D) taxpayers to participate as well. Currently, businesses donate money to an education scholarship organization and receive credits against their business profits tax. Individuals participating would receive credits against their I&D taxes.
The ETC has not been very popular with businesses. There are other much more appealing tax breaks. By including individual I&D taxpayers, however, the program would become very popular, very quickly – especially since high-income taxpayers who take advantage of this would make a profit! By stacking state ETCs with charitable tax deductions at the federal level, top bracket income taxpayers would end up receiving more money back than they donated. With a return on investment exceeding 20%, it won’t take very long for financial planners and tax accountants to make this very, very popular.
Proponents of the bill claim this tax credit would be available to “all” I&D taxpayers. However, with profit-making potential for high-end donors, these tax credits will most certainly be gobbled up well before tax season approaches for most taxpayers. The program’s $5.1 million annual cap would easily be reached which means $5.1 million in potential state revenues would be siphoned off to private and religious schools each year. We know the constitutionality of this remains in question, and meanwhile, the New York-based scholarship organization running the program would collect ten percent of these millions in donations as administrative fees.
So, where does this leave the state when millions of potential state tax dollars are diverted? We know how the budgeting process works. A five million dollar hole in annual revenues (or ten million dollars over the biennium) would require a new revenue stream or a budget cut. Since no new revenue stream is proposed in the bill, a ten million dollar loss would force cuts in critical state services as well as the downshifting of this burden to the local level yet again.
I for one, will not be supporting a bill that would put undue pressure on local property taxpayers in order to create a tax loophole for a wealthy few.
I voted NO on HB 1686 in order to protect the property taxpayers of Milford and all Granite Staters. HB 1686 is currently in the Senate Ways & Means Committee. If you feel like your property taxes are high enough, share your concerns about the bill with committee members: Senators Daniels, D’Allesandro, Feltes, Guida and Sanborn. Senators Daniels and Sanborn are two of the bill’s sponsors.