Support the NH Capital Gains and Estate Tax AmendmentsBy Michael Marsh
A century of Republican control of our state legislature has left New Hampshire with the seventh most regressive tax system in the country. Working people pay four times as much of their income in state and local taxes here than the wealthiest New Hampshire residents. This did not happen by accident, but because previous legislatures consistently voted to increase those taxes that affected working people. The Housebudget includes two provisions that will reverse this policy; the Senate budget does not.
The first provision is a change to our estate tax law, which was in place for 70 years before it was effectively eliminated by Congress under President Bush in 2001. The change puts an 8% tax on estates larger than $2 million (or $4 million for a couple if they havedone estate planning). This will affect only the wealthiest New Hampshire estates – barely 100 people per year. Here are a few facts about the change:
- The estate tax limits the further concentration of wealth in this state and will help rebuild a strong middle class.
- The estate tax will not affect 99% of the estates in New Hampshire. Every penny will be paid by individuals with at least $2 million in assets or couples with $4 million.
- The tax protects surviving spouses because an estate transferred to a spouse is tax-free.
- These changes to our estate tax will make our tax system more just. It is not fair that a working person pays state taxes every time he goes to a fast-food restaurant for lunch but a wealthy individual who inherits an estate worth millions pays nothing at all.
- The tax is modest – for a couple with a $5 million estate, the effective tax rate is less than 2%.
- The tax follows the current federal estate tax rules which include important exceptions that protect family farms and small businesses.
- The tax encourages giving to charities because all charitable gifts are tax deductible.
The second important tax provision in the budget is an expansion to our current Interest and Dividends tax. Today we have a 5% state tax on most forms of unearned income, including interest, dividends, and taxable annuities. This tax raised $117 million last year. The budgetextends this tax to include the largest source of unearned income: capital gains. Capital gains are the profits on the sale of assets like stocks, businesses, and real estate. The expansion will also allow usto finally increase the exemption for interest and dividends, reducingthe tax on the fixed-income poor who depend on CD’s and savingsaccounts. In a good year, the capital gains tax could bring in $150 million or more in new revenues. Even in today’s economy, the revenue will be at least $50 million per year. Here are some facts about the capital gains tax:
- Who will pay this tax? Overwhelmingly, it will be paid by wealthy New Hampshire residents. In 2006, the last year the IRS has complete data, more than 92% of the capital gains tax would have been paid by people making more than $200,000 per year, and less than 1% of it would be paid by people making under $100,000.
- If you are a middle class tax payer, your federal income tax rate is 25%. If you are a wealthy person with a long-term capital gain of any size whatsoever – even millions of dollars – your tax rate is 15%. It is simply not fair that people should pay higher taxes on income earned from working than they do on unearned income. At the minimum, they should be taxed the same. The capital gains tax provision in the budget will start to make these tax rates more even.
- Capital gains on the sale of a primary residence are protected. There is a $250,000 exemption ($500,000 for a couple), and only gains above this amount are taxable.
- The bill reduces the tax on small savers because it more than doubles the amount of interest and dividends income that is exempt from tax, from the current $2,400 per person to $5,000 (or $10,000 for a couple).
- For the great majority of working class and middle class people in this state, the changes to the Interest and Dividends tax in the budget will decrease the amount of tax they pay.
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“It is simply not fair that people should pay higher taxes on income earned from working than they do on unearned income. " Middle class and lower class don’t pay any taxes on unearned income. Higher class pays same taxes on earned income from working, as everybody else does in NH.
Taxes are looting at the point of a gun.
1. This does nothing to ‘build a strong middle class’ It does ‘prevent concentration’ by stealing money that belongs to people (the estate owners) and instead of distributing it as the owner desires, allowing the state to take it instead.
4. Nonsense. You can’t equate a non spending event with a spending event. If the person inheriting the estate goes to a fast food restaurant and spends some of the money, they pay the same as a “working” person… which is nothing in NH as there is no sales tax.
5. This is the definition of wealth re-distribution. Picking the winners is not an accurate representation of ‘fair’, nor is more people paying less.
Capital Gains Tax
1. It probably won’t be you paying this… so it’s ok. Again, check your definition of fair. They said this about the federal income tax initially (that it would only impact the top 2% of US citizens)… how’s that working out? It’s also not true. Anyone with a mutual fund account will be impacted by this tax.
2. Completely misleading. We have a marginal tax rate. If you are a married couple making $100,000 your tax bracket is 25% but your effective tax rate is only 13.75% (after standard deduction and marginal tax calculation). You are already paying less than the current federal capital gains rate. Additionally, if the tax passes, your taxes will go up on this income as well – primarily affecting retired people who live off this type of income.
4. Small savers don’t make $10,000 in interest or dividends. They make a few hundred to a few thousand dollars at today’s rates. This will impact less than .01% of savers (basically large capital holders with very conservative saving profiles). All these ‘savings’ will be offset however by the fact that the same people will be paying the new capital gains tax on all their other retirement investments.
5. See Estate Tax number 5 above. This is not the same thing as “fair”. This is like saying vote for it because we will take more from someone else and give it to you, and there are more of us so they can’t stop it.
The ‘wealthiest 1%’ in this country already pay 37% of all tax revenue. That’s more than the ‘bottom 90%’ combined (30%). We left fair a long time ago. This bill just continues to punish people for investing, saving, and succeeding.