NH Gov. Opposes Taxes On Income, Sales Amid COVID-19

By James Nani
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Law360 (May 27, 2020, 7:55 PM EDT) -- New Hampshire's governor said he would reject any proposals to impose personal income or sales and use taxes to deal with looming revenue shortfalls that could reach $454 million because of the COVID-19 pandemic.

Gov. Chris Sununu, a Republican, told a reporter during a news conference Tuesday that he would veto any proposal to institute a personal income tax or a sales and use tax in the state. Sununu made the statement as the state faces an estimated revenue shortfall of $167.3 million in the current fiscal year and $286.6 million in the next, according to the state Department of Revenue Administration.

"In terms of the tax code, absolutely not, we should not be passing broad-based taxes," Sununu said. "I know the Democrats tried to pass their income tax last time. There was broad-based support by the Democrats in the House and the Senate. And as much as they want to keep pushing those ideas, we're going to veto them and hold those vetoes, because that is not what New Hampshire does."

Sununu said it was the wrong time to pass such taxes because of the tough economic times caused by the novel coronavirus, which causes the respiratory disease COVID-19. While he was unwilling to cut some programs, Sununu said that instead of increased or new taxes, tough decisions should be made about spending.

"The idea that we've been talking about these broad-based sales tax and income taxes out of the Democrats right now, it gets me a little concerned. It should get everyone a little bit concerned," Sununu said.

Sununu's office didn't immediately respond to requests for comment Wednesday, but the governor has recently called on the state's legislators to repeal economic triggers that could increase business taxes automatically because of steep decreases in state revenue.

Joe Sweeney, a spokesman for the New Hampshire Republican Party, said the Democratic-controlled legislature has introduced bills that include a proposed constitutional amendment to allow a new state broad-based tax that could be used to reduce property taxes. He also pointed to a failed proposal that would have imposed the first sales and use tax in the state with a 4.3% rate on the sales of televisions, computers and other electronics.

Sweeney also noted H.B. 712, which lawmakers passed March 12 and which would enact a paid family and medical leave program. If Sununu vetoes the bill, two-thirds of the legislature will be needed to override the veto. A similar measure, S.B. 1, was vetoed by Sununu in 2019, and the veto was sustained.

"Whenever Democrats introduce an income or sales tax, Republicans in New Hampshire will always fight against their pro-tax agenda," Sweeney said.

Anna Brown, director of research and analysis at the New Hampshire voter information nonprofit Citizen Count, said there were no 2020 state bills waiting for a vote that would establish a broad-based income or sales and use tax. But she noted opponents argue H.B. 712 creates an income tax because employers would pay 0.5% of wages per employee as premium payments to the state. Supporters argue the program would be similar to an existing unemployment system, which is also paid with a percentage of employee wages, she said.

In a statement Wednesday, Senate Majority Leader Dan Feltes, D-Concord, told Law360 that Democrats have been standing up for ordinary people and working families amid the COVID-19 pandemic by passing the paid family and medical leave insurance measure. Feltes is running to be the state Democratic Party nominee for governor to run against Sununu.

"Gov. Sununu opposes paid family leave, including going so far to veto a paid family leave bill with bipartisan sponsorship," Feltes said. "He tries to label it an income tax as an excuse. Gov. Sununu, time and time again, pads the pockets of corporate special interests and millionaire campaign donors at the expense of working families while using the tired, empty talking points of the past as his excuse."

Curtis Barry, a lobbyist who represents the New Hampshire Retail Association, told Law360 there's been no serious discussion so far about a broad-based tax and particularly any sales and use tax. He noted Andru Volinsky, another Democrat seeking the Democratic nomination to challenge Sununu, has left those two taxes on the table as a possibility while Feltes has rejected them.

Barry said the acceleration to remote retail sales and away from brick-and-mortar sales may have an effect on commercial property values, and a sales and use tax would exacerbate a weakening of commercial property values.

"The N.H. Retail Association has been consistent in its unyielding opposition to a sales tax, which tax experts here have referred to an outdated tax scheme that does not reflect today's economy," Barry said.

Any push to pass a broad-based income or sales and use tax would have to be introduced as an amendment to an existing bill, which is constitutionally difficult, and would face a big uphill battle for several other reasons, Brown, with Citizen Count, told Law360. She noted states are pressuring the federal government to provide money that would cover general tax revenue shortfalls.

"It seems very unlikely that Democrats would push a controversial broad-based tax, in an election year, when the budget deficit might be addressed with federal funds," Brown said. "Next year is a budgeting year, so legislators will likely wait until then to see what the revenue situation is. Even then, rather than introduce a broad-based income tax, it seems more likely they would favor a more limited proposal, such as a tax on capital gains."

Rep. Susan Almy, D-Grafton, chairwoman of the House Ways and Means Committee, told Law360 via email there is no legislation for sales and use or income taxes, and new bills to impose such measures can't be introduced. 

"Broad-based [personal income tax] and [sales tax] have always been third rails in [New Hampshire], despite our enormous difficulty in getting through recessions with services intact and enormous property taxes, and the governor seems to be in election mode already," Almy said.

--Additional reporting by Paul Williams. Editing by Tim Ruel.

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