New Hampshire – New Hampshire Republicans and conservative groups are celebrating the official end of the state’s tax on income from interest and dividends, which expired on December 31, 2024. The elimination of the tax, approved earlier by the state Legislature, effectively brings an end to New Hampshire’s income tax system.
While New Hampshire is widely known for having no broad-based personal income tax, the Interest and Dividends Tax had remained as the last income-based levy on the books. Its expiration solidifies the state’s status as one of the few in the U.S. without any income tax.
On New Year’s Eve, Republican lawmakers and conservative tax advocates marked the occasion with a symbolic celebration, including a mock coffin inscribed with “RIP I and D Tax.” Andrew Cline, president of the Josiah Bartlett Institute for Public Policy, expressed strong opposition to any future attempts to reinstate the tax.
“This tax is dead in New Hampshire, and like all dead things, it should stay dead,” Cline said. “New Hampshire doesn’t need a reputation as a state where people are attacked by a zombie income tax.”
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A Gradual Phaseout
The Interest and Dividends Tax, originally enacted in 1923, taxed income from certain investments, such as dividends and interest, but exempted common retirement savings accounts like IRAs, 401(k)s, and college savings plans.
In 2021, the GOP-led Legislature approved a phased elimination of the tax as part of the state’s two-year budget, gradually reducing the rate from 5% to 4% in 2023, and to 3% in 2024. Lawmakers accelerated the phaseout in the 2023 budget, setting January 1, 2025, as the final expiration date.
Taxpayers will still need to file and pay the tax for 2024, but it will be their last time doing so.
Debate Over Impact
Republicans view the tax repeal as a victory for taxpayers and an economic boost, arguing that the tax disproportionately impacted retirees on fixed incomes. They also emphasize that New Hampshire is now one of nine states without any income tax, joining Florida, Texas, Tennessee, Nevada, South Dakota, Washington, Wyoming, and Alaska.
“New Hampshire’s abolition of the last vestiges of the state income tax is part of a nationwide competition among the 50 states to reduce taxes, encourage investment, create new jobs, and attract people,” said Grover Norquist, president of Americans for Tax Reform.
Democrats, however, warn that the repeal could lead to significant funding gaps for essential services such as public safety, education, and infrastructure.
“New Hampshire already has the highest property taxes in the nation,” said House Democratic Leader Alexis Simpson. “While regular people struggle with rising costs, we should not celebrate tax policies that primarily benefit the wealthiest.”
Democrats had pushed for amendments to exempt more low-income households but were unsuccessful in preventing the tax’s repeal.
A Key Election Issue
The tax’s elimination was a central issue in the recent gubernatorial race. Republican Kelly Ayotte, who supported the repeal, defeated Democrat Joyce Craig, who campaigned on bringing the tax back. Ayotte secured nearly 54% of the vote.
As the tax era ends, New Hampshire further cements its reputation as a low-tax state, appealing to retirees, businesses, and individuals seeking financial relief from income taxes.
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