While crime stories, campus protests and political drama captured much of the media attention this week, a bill with tremendous potential consequences for taxpayers quietly passed the House on Thursday.

Senate Bill 383, which has passed both chambers in slightly different versions, would strengthen local tax caps and allow school district caps to be tied to enrollment. 

Under current state law, town and school district tax caps can apply to estimated taxes “as shown on the budget.” That excludes off-budget warrant articles that might also have a tax impact. SB 383 would cover the budget and “all other warrant articles with a tax impact.”

RSA 32:5-b II mandates that a town or district “tax cap shall be either a fixed dollar amount or a fixed percentage applied to the amount of local taxes raised by the town or district for the prior fiscal year…”

SB 383 authorizes voters to use “a multiplication factor” that would cap tax increases at the inflation rate times population growth. That’s been the general idea behind tax caps from the start. The bill lets towns use this more precise formula rather than a fixed amount or rate. Those fixed numbers were always basically a proxy for the multiplier anyway.

Perhaps most consequentially, SB 383 creates a new formula for school district tax caps. The school district formula would be a combination of inflation times enrollment, rather than municipal population growth. That’s an important change. School budgets can be the largest portion of local budgets and the largest driver of local spending and tax increases.

Our 2023 analysis of district school spending in New Hampshire found that there generally wasn’t a strong correlation between school enrollments and local school spending. New Hampshire public school districts lost 29,946 students from 2001-2019, but increased spending by an inflation-adjusted $937 million. School district budgets tend to grow faster than the inflation rate, and faster than all other areas of government spending, even when enrollment is falling, we found. 

In Manchester, for example, school district enrollment fell by 13% from 1995-2018. During those same years, city school district spending grew by a remarkable 68%. 

This year, the Manchester school district’s proposed budget was 7.9% higher than the 2020-21 school budgetafter adjusting for inflation—though enrollment was 4.3% lower than in the 2020-21 school year.

Now, Manchester has a tax cap, and that cap applies to the school district’s proposed budget. Neither the city nor the school district is allowed to propose a budget that exceeds the average inflation rate of the prior three years. 

(City tax caps are regulated in a separate section of state law (RSA 49) than are town tax caps. Manchester’s cap, like Nashua’s, is tied to the inflation rate.)

Though SB 383 doesn’t apply to cities, and thus wouldn’t affect Manchester’s school district tax cap, Manchester’s experience shows how the formula in the bill would put a further constraint on spending.

Manchester’s school district taxes have been restrained by this cap for more than a decade, but spending still grew rapidly despite falling enrollment. The formula Manchester uses does not take into account district enrollment. If it had, the cap would’ve been lower, and therefore might have prompted some efficiencies in district budgeting.

The city school district accounts for about 52% of Manchester’s budget, which shows how consequential the new caps allowed in SB 383 could be. 

The formulas allowed in SB 383 are more flexible than the fixed number or rate caps towns and districts can adopt now. That could weaken some of the opposition to tax caps, leading to their more widespread adoption. At the same time, the bill lets voters strengthen caps by covering warrant articles that have tax impacts and by tying school district tax changes to enrollment. On the whole, the bill would turn tax caps into a more powerful and more appealing tool for taxpayers.

New Hampshire is less than a year away from eliminating its income tax. 


A bill up for consideration in the House Ways & Means Committee on Tuesday would bring it back.

It’s a myth that New Hampshire has no income tax. The state’s Interest & Dividends Tax is a levy on income derived from dividends or interest. Under current law, this tax expires on Dec. 31 of this year. That would make New Hampshire the eighth U.S. state with no direct tax on personal income. 

Joining that elite club won’t happen if the Legislature endorses a plan by state Reps. Susan Almy and Mary Jane Wallner. Their House Bill 1492 would bring the income tax back from the dead. 

The current I&D Tax, long set at 5%, was phased down to 3% this year and disappears on Dec. 31. HB 1492 would resurrect it, but with some changes. Instead of exempting the first $2,400 of interest income, as in current law, HB 1492 would exempt the first $7,500. The bill keeps the practice of raising that exemption by 50% for filers who are age 65 or older, blind, or disabled and unable to work.

Almy and Wallner, former chairs of the House Ways & Means and Finance Committees, respectively, seek to address complaints about the impact of the Interest & Dividends Tax by shrinking the pool of people who must pay it. 

The argument against repeal has always been that the tax brought in a good bit of revenue and applied primarily to the very wealthy. Ultimately, those were not effective in preventing its repeal. First, surging business tax revenues in the last decade have weakened the case that the state needs the revenue. Second, it was never exactly true that the tax affected only the super rich. 

The largest single group of I&D Tax filers are those who owe between $1 and $500. In Fiscal Year 2021, 28,061 Granite Staters (39.4% of the tax’s filers) fell into that category, Department of Revenue Administration data show. 

To pay $500 at a tax rate of 5%, one would need to earn $10,000 in interest or dividend income. At current interest rates, that $500 payment would come from someone who was able to sock away $200,000 in a CD or similar interest-bearing account. That’s certainly a tidy sum to have saved, but one does not have to be a millionaire to own an investment of that size. 

A $500 payment is the top end of that group. The bottom end is $1, which would be the payment on $20 in interest (after the $2,400 exemption).

Add those who paid between $500-$1,000, and more than half (52.4%) of I&D Tax filers in FY 2021 paid between $1-$1,000 in applicable taxes. Another 23% paid between $1,000-$10,000. That would mean that nearly three-quarters of I&D Tax filers earned between $20-$200,000 in taxable interest income (after exemptions).

Raising the exemptions, as HB 1492 does, will lower the tax bill for some earners and exempt others entirely. It’s unclear how many people would be affected, but it’s safe to assume that a higher percentage of I&D Tax payers would fall into the upper income categories than have in the past. 

However, that does not change the fact that many thousands of Granite Staters (and potential Granite Staters) who aren’t super-rich earn interest and dividends income and would see the reinstatement of this tax as a financial threat. People who begin building small sources of investment income hope to grow those into large ones.

Reviving this tax (which is already deceased under current law) would mean literally creating a new income tax and applying it only to a certain class of higher-income residents. Anyone not convinced of this need only read the text of current law, administrative rule and HB 1492.

Current statute (RSA 77:1) refers to the I&D Tax as an “annual tax upon incomes.” The Department of Revenue Administration refers to it as a “tax on interest and dividend income.” HB 1492 refers to it as an “annual tax upon interest and dividend incomes.”

It is unmistakably an income tax, which means that HB 1492 would do in New Hampshire what the Massachusetts millionaire’s tax did in the Bay State in 2022. It would target a specific group of residents with a punitive tax merely because the group is too small to vote out the tax’s supporters and too unpopular to convince a majority to defend it. 

Within months of its passage, the millionaire’s tax was already sending wealthy Massachusetts residents to New Hampshire and Florida. Enacting a similarly punitive income tax targeting these same individuals will have the predictable effect of reducing immigration to New Hampshire and increasing immigration to Florida (from both Massachusetts and New Hampshire). 

When the tax vanishes at the end of this year, New Hampshire will be the only state in the Northeast without an income tax. Today the closest one to New England is Tennessee. Under the HB 1492 plan, the Northeast would go back to being the only U.S. region without a no-income-tax state. For New Hampshire’s economic competitiveness, this would be a stumble backward, just as the state is about to stick the long-awaited landing. 

Shopping in tax-free New Hampshire this Thanksgiving weekend would save New Englanders between $31–$40, based on projected spending during Black Friday and Cyber Monday.

According to an annual survey conducted by Deloitte Consulting LLP, consumers plan to spend an average of $567 over the course of Black Friday and Cyber Monday this year. 

That’s a 13% jump from last year’s average. 

The sales tax rate for each New England state (both statewide and local, if applicable) is:

  • New Hampshire: 0%
  • Maine: 5.50%
  • Massachusetts: 6.25%
  • Connecticut: 6.35%
  • Vermont: 6.359%*
  • Rhode Island: 7%

*Vermont is the only New England state that has local sales taxes, which average 0.359% (maximum of 1%). The combined sales tax rate in Vermont, on average, is 6.359%. 

At those rates, the sales tax bill on $567 spent this weekend would be:

  • New Hampshire at 0% = $0 
  • Maine at 5.50% = $31.19
  • Massachusetts at 6.25% = $35.44
  • Connecticut at 6.35% = $36
  • Vermont at 6.359% = $36.06
  • Rhode Island at 7% = $39.69

Spending Black Friday in neighboring Maine turns a $567 bill into a $598 bill. Shopping in Massachusetts turns it into $602, while shopping in Connecticut or Vermont would bring the total bill to $603.

Rhode Island tops the New England Christmas shopping naughty list this year with a total price tag of about $607.

But in New Hampshire, that bill stays put at $567.

The lack of a sales tax is one reason New Hampshire finished first in overall freedom (including No. 1 in economic freedom) in the Cato Institute’s Freedom in the 50 States report, as well as first in economic freedom among all North American jurisdictions in the Fraser Institute’s Economic Freedom of North America 2023

Meanwhile, the five other New England states finished in the bottom half of both rankings. 

New Hampshire shoppers are the real Black Friday winners: In addition to saving up to $40 in sales taxes versus their neighbors, the tax-free shopping environment has stimulated the development of outlet malls and other low-price shopping attractions that help to keep prices low throughout the year.


New Hampshire is the most economically free state in North America and in the United States, once again edging Florida to top every Canadian province, U.S. state and Mexican state as ranked by the Fraser Institute, Canada’s free-market think tank. 

The Fraser Institute’s 2023 Economic Freedom in North America report, released in partnership with the Josiah Bartlett Center for Public Policy, measures government spending, taxation and labor market restrictions using data from 2021, the most recent year of available comparable data.

New Hampshire surpassed Florida as having the highest level of economic freedom in the U.S., having scored 7.96 out of 10 in this year’s report. Rounding out the top five freest states are Florida (2nd), Tennessee (3rd), Texas (4th) and South Dakota (5th). Puerto Rico came in last with 2.85. The least free states were New York (50th), California and Vermont (tied for 48th), Oregon (47th) and Hawaii (46th).

The Granite State also topped the list of all states in North America, scoring 8.14 out of 10, followed by Florida (8.07), South Carolina (8.06), and then Idaho and Indiana, tied for fourth (8.05). Alberta is the highest-ranking Canadian province, tied for 31st place with a score of 7.90. 

“New Hampshire is proof for all of North America that economic freedom creates maximum opportunity and prosperity,” Josiah Bartlett Center President Andrew Cline said. “The formula is proven, and anyone can follow it. Even Vermont, if it wants to.” 

“The freest economies operate with comparatively less government interference, relying more on personal choice and markets to decide what’s produced, how it’s produced and how much is produced; as government imposes restrictions on these choices, there’s less economic freedom and less opportunity for prosperity,” said Fred McMahon, the Dr. Michael A. Walker Research Chair in Economic Freedom at the Fraser Institute and report co-author.

The report includes an all-government ranking, which adds federal government policy to the index and includes the 50 U.S. states and the territory of Puerto Rico, 32 Mexican states, and 10 Canadian provinces.

Taking into account both federal and state policies, U.S. economic freedom declined from 2003 to 2011, began to recover, and then declined again after 2017. The last two years have seen the lowest levels of measured economic freedom in the U.S. in the last two decades. And while the U.S. remains more economically free than Canada, the gap is relatively small.

“The evidence is clear—lower levels of economic freedom are associated with less prosperity, slower economic growth, less investment, and fewer jobs and opportunities,” said Dean Stansel, economist and research associate professor at Southern Methodist University and co-author of the report.

The Economic Freedom of North America report, also co-authored by José Torra, the head of research at the Mexico City-based Caminos de la Libertad, and Ángel Carrión-Tavárez,  director of research and policy at the Instituto de Libertad Económica in Puerto Rico, is an offshoot of the Fraser Institute’s Economic Freedom of the World index, the result of more than a quarter-century of work by more than 60 scholars, including three Nobel laureates.

See the full report at www.fraserinstitute.org/economic-freedom.

New Hampshire’s cores in key components of economic freedom (from 1 to 10 where a higher value indicates a higher level of economic freedom):

  • Government spending: 8.25
  • Taxes: 7.68
  • Labor Market Freedom: 7.60

About the Economic Freedom Index

Economic Freedom of North America measures the degree to which the policies and institutions of countries support economic freedom. This year’s publication ranks 93 provincial/state governments in Canada, the United States and Mexico. The report also updates data in earlier reports in instances where data has been revised.

For more information on the Economic Freedom Network, datasets and previous Economic Freedom of North America reports, visit www.fraserinstitute.org. And you can “Like” the Economic Freedom Network on Facebook at www.facebook.com/EconomicFreedomNetwork.

Download the entire report here: EFNA-2023-US.


As the Biden administration gets closer to finalizing its proposed rule banning the sale of menthol cigarettes and flavored cigars nationwide, a well-known aphorism comes to mind: “The road to hell is paved with good intentions.”

The administration’s logic behind the federal ban is that doing so will reduce smoking and correspondingly improve public health. This is the same logic used to justify increasing tobacco taxes or banning tobacco and vaping products at the state level. 

When a state bans flavored tobacco or increases excise taxes on cigarettes, legal cigarette sales in the state tend to fall as a result. But what about illegal and out-of-state sales?

High cigarette taxes and bans on flavored tobacco products create black and gray markets through which smugglers become the new suppliers of these products. 

Tax rates and smuggling

The Mackinac Center for Public Policy tracks cigarette smuggling in the United States. Its 2021 report showed how cigarette smuggling increases as excise tax rates on tobacco products increase. 

New York, which taxes cigarettes $4.35 a pack, saw the highest rate of inbound smuggling—54.48%. The total number of smuggled packs, more than 254 million, was second in the country behind California’s more than 465 million. California also had the second-highest inbound smuggling rate (44.02%) and a tax rate of $2.87 per pack.

When taxes get high enough to encourage large-scale smuggling, tax revenue falls as people stop buying from legal vendors and start buying on the street, and as some vendors switch to out-of-state suppliers and simply don’t report or pay taxes on those purchases. As a result of their high taxes, California and New York saw the two largest revenue losses—more than $1.3 billion and $1.1 billion, respectively. 

With a tax rate of $3.51 per pack, Massachusetts had the fourth-highest inbound smuggling rate (37.59%) and the ninth-highest number of smuggled packs (more than 63 million), resulting in the sixth-largest revenue loss (nearly $224 million) in 2021.

Where were these Massachusetts and New York smugglers purchasing these products? Mostly in New Hampshire. 

With by far the lowest state tax on cigarette products in the Northeast ($1.78 per pack), the Granite State saw one of the highest outbound smuggling rates in 2021 (-34.13%, which translates to more than 32 million packs). 

As smugglers crossed into New Hampshire to purchase cigarettes, the State of New Hampshire collected an additional $58 million in revenue. 

High cigarette taxes incentivize illicit market activity, encouraging smugglers to purchase products in low-tax states, cross state lines with them, and consume or resell the products in high-tax states. 

A similar dynamic takes place when a state bans tobacco products. 

Bans and black markets

After Massachusetts banned flavored tobacco in 2019, JAMA Internal Medicine found that flavored tobacco sales dropped in the state. Successful policy, right?

Not so fast. “In fact, the flavor ban has been far from successful, as sales in both New Hampshire and Rhode Island experienced double-digit growth—almost making up for the entire decrease in Massachusetts,” according to the Tax Foundation.

After Massachusetts’ ban, total sales of flavored tobacco in New England fell by only about 1% from June 2019–May 2020 to June 2020–May 2021. 

While sales of flavored tobacco decreased by 24% in Massachusetts between the year before the ban to the year after the ban, they increased by 22% in New Hampshire, 18% in Rhode Island, and 6% in Vermont. 

In fiscal year 2021, Massachusetts lost out on $125 million in tobacco excise tax revenue as sales shifted to other states. 

It’s a mistake to equate falling cigarette sales at licensed, regulated shops with an equivalent decline in smoking. The evidence shows that high taxes and bans on tobacco products shift a lot of activity to the black market. 

A University of California at San Diego study of Massachusetts licensed tobacco retailers in the two years before and the two years after the flavored cigarette ban found that the number of new tobacco retail licenses fell by 53% after the ban, with the total number of retail licenses falling by 5.8%. This finding, combined with the documented increases in out-of-state sales and cross-border smuggling, underscores the point that the ban has not ended menthol cigarette smoking in Massachusetts, but rather has moved these products onto the black market. 

Responding to incentives

Massachusetts created strong incentives for people to buy tobacco products elsewhere and bring them into the state for personal use and/or sales. People responded just as expected.

It’s important to recognize that criminals respond to incentives too. Gangs and drug smugglers can increase their revenues by adding cigarette smuggling to their repertoire of illicit activities. In the name of public health, states can find themselves strengthening existing organized crime networks and even creating new ones by imposing bans or high tax rates. 

Bans and punitive tax rates also induce evasive behaviors among otherwise law-abiding citizens. 

The Massachusetts Department of Revenue’s Illegal Tobacco Task Force issues press releases boasting of its enforcement of the state’s tobacco laws. Those press releases list people charged with running large-scale smuggling operations that include flavored tobacco, vapes, and marijuana. But they also include store owners arrested, convicted, and jailed for purchasing tobacco products out of state to avoid Massachusetts’ high taxes. 

It’s worth noting that the task force is part of the Department of Revenue. It was created “to address the problem of illegal tobacco distribution in the Commonwealth and the loss of millions of dollars of legitimate tax revenues to the state every year [emphasis added].” Massachusetts’ tax policy stimulated so much tax evasion that the state created a separate team just to find and punish tax evaders.

The solution to this interstate smuggling, some advocates argue, is a nationwide ban. Such policies used to be called “prohibition.” But as that term has fallen out of political favor, advocates instead use the term “ban” now.  

There is a large overlap between the people who want to ban tobacco and vaping products and the people who want to maximize government revenue for social welfare programs. Those two goals are in conflict. A Tax Foundation analysis of a proposed menthol cigarette ban shows how.

“A nationwide ban would result in a federal revenue decline of $1.9 billion in the first full year after prohibition,” according to the Tax Foundation. “In the states, the decline in excise tax revenue would be $2.6 billion, the decline in sales tax revenue would be $892 million, and the decline in MSA payments would be $1.2 billion, for a total state revenue loss of $4.7 billion.”

In New Hampshire, where menthol cigarettes make up 34% of the state’s market, a federal ban would mean more than $49 million in lost revenue, of which 71% would be a decline in excise tax revenue. 

And just like Massachusetts’ ban resulted in 90% of its lost sales merely moving to neighboring states, a federal ban would increase sales and consumption of other tobacco products like non-flavored cigarettes, and it would move sales and consumption of menthol cigarettes underground. 

For example, according to Reason Foundation, “approximately 22 million additional packs of nonmenthol cigarettes were sold in those states in the year after [Massachusetts’] flavor ban, leading to a net increase in cigarette sales.”

Where will illicit menthol cigarettes come from after a nationwide ban is enacted? The same place so many other banned products do: China. 

In 2020, the U.S. Food and Drug Administration banned flavored vaping products. It boasts that since the ban, it has rejected 99% of requests to sell new e-cigarettes, implying that the ban has reduced access to undesired products. 

But CBS News reported in June that the “number of different electronic cigarette devices sold in the U.S. has nearly tripled to over 9,000 since 2020.”

The FDA’s ban excludes disposable vape products. So, predictably, consumers migrated to disposables. But closing that “loophole” isn’t the solution advocates think it is. The surge in different vape products sold has been “driven almost entirely by a wave of unauthorized [emphasis added] disposable vapes from China.”

Consumers and suppliers always find ways to circumvent federal bans.

The primary achievement of such bans will be to replace legal, regulated products with illegal, unregulated ones, often from unscrupulous manufacturers. In a legal market, manufacturers and sellers have strong incentives to build market share by building trust with consumers. Legal markets promote accountability. Black markets do the opposite. Manufacturers and sellers have strong incentives to conceal their identities, which weakens accountability and reduces consumer safety. 

Any federal ban would bolster illicit trade, flooding the market with less safe products from unaccountable manufacturers. 

The goal of high cigarette taxes and flavored tobacco bans may be an altruistic one, namely to reduce smoking and improve public health. But the actual outcome of such policies is what’s important. Creating black markets, reducing accountability, shifting money from legitimate businesses to criminal networks, and reducing overall economic and personal freedom create a net negative for the economy and society. 

Reducing teen smoking is a worthy goal. Which is why it’s already illegal for teens to smoke. Rather than using policy levers that distort market incentives and infringe on the personal freedom of adults, activists should focus on improving their efforts to educate young people about the risks of smoking.

If the winner of this week’s $1.4 billion Powerball jackpot lives in any New England state but New Hampshire, the record win would come with a staggering tax bill.

Excluding New Hampshire, which does not tax lottery winnings, the state income tax bill on a $1.4 billion Powerball jackpot would range from $36.8 million–$126 million, depending on where in New England the winner lives and whether he or she took the annuity or lump-sum payment.

The top applicable personal income tax rate for each New England state is:

New Hampshire: 0%*

Rhode Island: 5.99%

Connecticut: 6.99%

Maine: 7.15%

Vermont: 8.75%

Massachusetts: 9%

*New Hampshire levies a tax of 4% on interest & dividends income, but that does not apply to lottery winnings.

At those rates, the state income tax bill on $1.4 billion would be:

New Hampshire at 0% = $0

Rhode Island at 5.99% = $83.9 million

Connecticut at 6.99% = $97.9 million

Maine at 7.15% = $100.1 million

Vermont at 8.75% = $122.5 million

Massachusetts at 9% = $126 million

To put that in perspective, $126 million is not quite double catcher Jason Varitek’s $67 million in lifetime earnings from the Boston Red Sox

A winner’s actual tax bill would depend on which payout was taken. If a winner chose the annual annuity, the total tax bill would equal the amounts in the graph above, assuming no tax rate changes over the next 30 years. Since we can’t predict any tax changes, we have to go with the current rates.

Those tax bills would come annually based on each year’s annuity payment. Those payments would start at $21.1 million and grow to $86.7 million in the final year. The tax bill after the first year would range from $1.3 million in Rhode Island to $1.9 million in Massachusetts. The final tax bill (barring any tax rate changes over the next 30 years) would range from $5.2 million in Rhode Island to $7.8 million in Massachusetts. 

If a winner chose the $614 million lump-sum payment, the state income tax bill would be:

New Hampshire at 0% = $0

Rhode Island at 5.99% = $36.8 million

Connecticut at 6.99% = $42.9 million

Maine at 7.15% = $43.9 million

Vermont at 8.75% = $53.7 million 

Massachusetts at 9% = $55.3 million

These huge state tax bills would come after 24% of the prize is automatically withheld in federal taxes. The federal tax bill on $1.4 billion would be $336 million. On the $614 million lump-sum payout, it would be $147.4 million.

These stunning state income tax bills highlight exactly why New Hampshire is one of the top two destinations for people who move out of Massachusetts. (The other is Florida, which also has no income tax.)

New Hampshire is one of only eight participating states and two U.S. territories that don’t tax lottery winnings on top of federal taxes. The others are California, Florida, South Dakota, Tennessee, Texas, Washington, Wyoming, Puerto Rico, and the U.S. Virgin Islands.

The New Hampshire Lottery created a TV ad to air this week mocking Massachusetts’ 9% tax on incomes of $1 million or more. The new ad, spoofing the classic Saturday Night Live “Land Shark” sketch, features a Bay Stater bitten by the “no good Massachusetts tax shark that’s been swimming around stealing all our lottery winnings.”

The ad specifically calls out Massachusetts’ new “millionaire’s tax.” Last year, Massachusetts voters amended the state constitution to raise the income tax rate from 5% to 9% on annual incomes of at least $1 million. Without this millionaire’s surtax, Massachusetts’ tax bill on a $1.4 billion Powerball prize would drop from $126 million to $70 million. On the $614 million lump-sum payment, it would fall from $55.3 million to $30.7 million.

“Why play the lottery in Massachusetts where state taxes, including the new millionaire’s tax, will cost you an extra 9%?” the New Hampshire Lottery’s ad asks Massachusetts residents. “Instead, live free and play in New Hampshire where your income and lottery winnings are always free of state taxes.”

Granite Staters are having a good laugh at the ad, judging by the media coverage it’s received. But the serious point it makes is that you shouldn’t have to pay 9% of your income just for the privilege of living in your home state.

The high income tax rates in other New England states lift significant sums from people’s pockets every year. Vermont’s 8.75% personal income tax rate kicks in at $213,150 of income. Maine’s 7.15% rate kicks in at $58,050. A lot of non-rich New Englanders pay a hefty portion of their income just to live in a state that isn’t New Hampshire. 

“It does make one wonder just how much it’s worth paying out-of-pocket to live in a state like Massachusetts,” said Andrew Cline, president of the Josiah Bartlett Center for Public Policy. “Obviously, no one’s getting $126 million worth of services from the State of Massachusetts, so it just comes down to paying for the social status of living there. When you think of how Massachusetts would squander that money, putting up with such an exorbitant tax makes no sense. You’d do more social good by living in New Hampshire and donating $126 million to charity.”

The ad wasn’t meant only to tease Massachusetts, Charlie McIntyre, executive director of the New Hampshire Lottery, said. It also had a message for Granite Staters.

“Our New Hampshire players are fortunate to live—and play—in such an amazing, beautiful state, with an exceptionally high quality of life and of course, no state income tax,” McIntyre said in a statement announcing the ad campaign. “With this new campaign, we are having some fun reminding our players how good they have it, especially when they live free and play—and win!” 


On January 1, 2025, New Hampshire will ring in the new year as the only Northeastern state without an income tax. 

On that day, New Hampshire will join seven other states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming—as the only U.S. states that don’t tax personal income. (Washington state passed a capital gains tax in 2021 that its Supreme Court upheld this spring, erasing its status as an income-tax-free state.)

You might have thought New Hampshire already appeared on that list, given our reputation for having no sales or income tax. It doesn’t. 

While the state doesn’t tax individual earned income, it has taxed passive personal income since 1923. It does so through the Interest & Dividends Tax. From 1977 to 2022, the I&D Tax rate was 5%. 

The 2022–23 state budget included a provision to phase out the I&D Tax by 1 percentage point a year until its elimination in 2027. The tax this year is set at 4%.

The 2024–25 state budget adopted this month moves the repeal date to New Year’s Day 2025. 

Who pays the I&D Tax (and thus an income tax) in New Hampshire? Every New Hampshire resident and fiduciary whose gross interest and dividends income from all sources is more than $2,400 annually (or $4,800 for joint filers) is subject to the tax. 

Limited liability companies, partnerships, and associations with non-transferable shares whose gross interest and dividends income from all sources is more than $2,400 a year also pay it.

How much money does the I&D Tax extract from the economy annually? It yielded $126.0 million in fiscal year 2020, $120.7 million in FY 2021, and a record $157.5 million in FY 2022. 

Opponents of phasing out the I&D Tax have said the state could ill afford to lose that much revenue. But thanks to a growing economy, state revenues have exceeded budget targets in every fiscal year but one during the last decade. 

In the General and Education Trust Funds, revenues were $435.5 million above budget in FY 2022, $323.7 million above budget in FY 2021, and $173 million above budget in FY 2019. In the current fiscal year, revenues are already $487 million above budget. Revenues from the I&D Tax are $130 million so far this year but only $11.6 million above budget.

In the 2022–23 fiscal years, surplus business tax revenue alone has far exceeded I&D Tax revenues. If there’s ever been a good time to phase out the I&D Tax, it’s now.

The reason to do so is two-fold. 

One, it aligns New Hampshire’s tax system with its reputation and aspirations. If we’re going to promote ourselves as income-tax-free, we should be income-tax-free. 

“While New Hampshire does not levy a tax on wage income, its 4% tax on interest and dividends has been holding the state back from claiming its rightful place as a true no-income-tax state,” Dennis Hull of Americans for Tax Reform wrote

Two, it makes New Hampshire more economically attractive to individuals and businesses in an increasingly competitive environment.

In addition to the eight states without an income tax, nine states have a flat income tax rate. Since 2021, 22 states have cut individual income taxes. These states are all competing for residents who will contribute to GDP growth, particularly higher-wealth individuals who are able to invest in their communities and start new businesses.

With the I&D Tax on the books, New Hampshire looks less attractive to entrepreneurs, investors, and retirees, especially with East Coast states like Florida and Tennessee presenting increasingly economically attractive options.

While New Hampshire sat at 16th in the Tax Foundation’s 2022 state-local tax burden rankings, Florida was 11th and Tennessee was 3rd. In the Tax Foundation’s 2023 state business tax climate index, New Hampshire ranked 6th while Florida was 4th. 

Repealing the I&D Tax allows New Hampshire to better compete with the likes of fast-growing Florida and Tennessee.

In fact, when the I&D Tax is fully repealed New Hampshire will join Alaska as one of only two U.S. states with no income or sales tax. (Unless another state joins that elite club first.)

Having no income or sales tax of any kind will set New Hampshire apart from every other state between Maine and Alaska. It will be a particularly potent attraction here in the Northeast, where our neighbors impose both, and where Massachusetts last year raised income taxes by 80 percent for residents who earn $1 million or more. 

Accelerating the repeal of the I&D Tax by two years might seem like a small thing. But as states compete more aggressively for residents and businesses, being truly income-tax-free will do a lot to protect and enhance the New Hampshire Advantage.

“Very heavy taxes, are hurtful, because they lessen the increase of population by making the means of subsistence, more difficult.”

— John Adams, 1780

Last November, Massachusetts voters approved a so-called “millionaire’s tax.” It raises the state income tax from 5% to 9% for incomes of $1 million or more, an 80% tax increase. 

Four months later, the Massachusetts Society of Certified Public Accountants is sounding an alarm.

After surveying 270 member CPAs, the society in March released a paper titled “Massachusetts is Losing Residents and it’s Getting Worse: Can Tax Policy Changes Mitigate Outmigration?”

The survey of Massachusetts certified public accountants found that:

  • 82% of CPAs surveyed indicated that their high-income clients have expressed plans to leave Massachusetts in the next 12 months. Florida and New Hampshire are overwhelmingly the most popular choices for relocation. While some may argue that a move to Florida is driven by a desire for better weather and a different lifestyle, the fact that the second most popular destination is New Hampshire suggests that people want to stay in the area but may be motivated instead by a lower cost of living, including a lower tax burden. Furthermore, New Hampshire is set to repeal its Interest and Dividends Tax by 2026, which would make a decision to relocate even more appealing.

  • 61% of respondents indicated that tax policy is the primary reason their clients are considering leaving the Commonwealth in the next 12 months. 

  • An additional 39% of CPAs indicated that tax policy is a consideration for relocation. 

  • 0% of respondents indicated that tax policy is not a factor in the decision for high-income taxpayers to relocate.

  • More pointedly, half of CPAs said that the new Millionaire’s Tax specifically is the primary reason their clients are considering a move in the next 12 months.

“Some may have been willing to bear Massachusetts’ tax policy in the past, but moving from a five to nine percent income tax rate is an unprecedented 80% rate increase,” the report concluded. “That will undoubtedly inspire affected Massachusetts residents to reconsider their primary residence.”

New Hampshire Business Review reached a similar conclusion after interviewing New Hampshire real estate agents.


The Massachusetts CPAs call Massachusetts an “outlier” in the region for its extremely high tax rates and complex tax code. 

“Being an outlier makes it more difficult for the Commonwealth to compete with its regional neighbors and on the national landscape when it comes to attracting jobs, residents and capital investment, but it also violates basic tax principles of neutrality and economic efficiency,” the CPAs wrote.

“The current tax code introduces complexity and incentivizes opportunities to use a domicile change as a tax planning tool, which creates a host of unintended consequences for the state. Before the Millionaire’s Tax Massachusetts maintained a competitive edge in our region with the relatively low, flat individual income tax rate, which helped mitigate other issues such as the uniquely burdensome short-term capital gains tax rate and estate tax. Unfortunately, that is no longer the case.”

Those are words New Hampshire policy makers should always remember. 

New Hampshire is an outlier too, in the other direction. Our lower tax burden has helped to make our state the economic envy of the region, a continental marvel and a haven for tax refugees.

New Hampshire ranks 47th in state tax collections per capita, just a hair worse than Florida, according to a Tax Foundation ranking released this month. 

How do the other New England states fare? They’re all in the top 20. 

Vermont is No. 1, Connecticut 3, Massachusetts 7, Maine 15, and Rhode Island 16. 

New Hampshire collects very little tax revenue per person, compared to our neighbors, and yet we have the region’s lowest poverty rate and a booming economy. And we’re stealing population from the high-tax jurisdictions around us. Funny how that works. 

WalletHub, in an analysis also released this month, ranked New Hampshire 48th (third best) in tax burden. Maine and Vermont ranked in the top five, and the rest of the New England states were in the top 20. 

Migration patterns don’t precisely align with tax burden rankings because people aren’t 100% economically motivated, but there’s a tremendous amount of overlap. In 2022, Americans did tend to move from high-tax to low-tax states, as usual, according to several different data sets, including the Census’ own. 

The top in-migration states in 2022 were low-tax Florida, Texas, North Carolina, South Carolina and Tennessee, while the top out-migration states were high-tax California, New York, Illinois, New Jersey and Massachusetts, according to the list compiled by the National Association of Realtors.

Just-released Census data show that six of the top ten counties in the United States for population growth from July 2021-July 2022 were in Texas. The counties that lost the most people were Los Angeles County and Cook County, Illinois, Axios reported. 

The Massachusetts CPAs note in their report that a huge tax rate increase on people who are most able to move, passed right as the rise of remote work has made people less tied to their location, is a recipe for exodus. 

Likewise, a big tax rate cut on the same people, at the same time, would be a strong attraction. Strategically, this year would be the perfect time to accelerate the phase out of New Hampshire’s Interest & Dividends tax. 

Scheduled to phase out over the next four years, the tax remains for now a signal to high-wealth individuals that Florida would be a better relocation destination. 

Like any number of high Massachusetts taxes, the I&D tax is a disadvantage. It weakens New Hampshire’s competitive position and serves as a disincentive to move, or stay, here. 

It’s currently on schedule to be phased out by 2027. The House Finance Committee has recommended moving that date to 2025. Were the state to do that, or nix the tax entirely this year, it would not be lost on high-income individuals, retirees and anyone else with income from interests or dividends that New Hampshire’s tax burden is falling as Massachusetts’ is rising. 

New Hampshire is not listed among the seven states that truly have no income tax. Eliminating the I&D tax would put us on that list and make New Hampshire an even more attractive destination. 

Some might say that we don’t have to make ourselves more competitive if Massachusetts is making itself less competitive. But state tax competition is no longer just regional. 

The rise of remote work makes it even easier for people to shop for a low-tax place to live, regardless of where their employer is located. And the world’s increasing wealth makes it easier than ever for investors, entrepreneurs, retirees and others to move to favorable jurisdictions. 

The Massachusetts CPAs point out that when high-income residents leave Massachusetts, they take their community involvement and charitable giving with them. Making New Hampshire more attractive to these increasingly mobile people benefits not just New Hampshire’s economy, but our communities too. 

While Massachusetts is pushing higher-income residents out, New Hampshire has an opportunity to turn their attention away from Florida and toward the Granite State. 

Eight U.S. states have no income tax. 

New Hampshire is not one of them.

The Interest & Dividends tax lingers. A tax on passive income is still a tax on income, and this one has given New Hampshire an asterisk by its name when listed among the nation’s low-tax states.

At midnight on Dec. 31, 2020, Tennessee’s tax in interest and dividends ended, making it the eighth state with no tax on income. Six months later, New Hampshire legislators passed a budget that included a five-year phase out of our Interest & Dividends Tax.

But with policymakers in other states chasing the New Hampshire Advantage ever more aggressively, there is interest in eliminating the I&D Tax by the end of 2023 rather than 2026. 

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming are the only states that don’t tax income. (Washington passed a capital gains tax in 2021 but it’s been blocked by a court pending a challenge to its constitutionality.)

Florida, Tennessee and Texas all want to become known as the freest state in the nation. Florida Gov. Ron DeSantis already refers to the Sunshine State as the “Free State of Florida.” 

New Hampshire is losing its reputation as a refuge from burdensome taxation.

In the Tax Foundation’s State and Local Tax Burdens ranking, Tennessee ranks third, Texas sixth and Florida 11th. New Hampshire is down to 16th place. 

Florida ranks higher than New Hampshire in the Tax Foundation’s Business Tax Climate Index. It places fourth. New Hampshire is sixth. 

Florida last year passed New Hampshire to claim the top spot in the Fraser Institute’s Economic Freedom in North America report. 

The New Hampshire Advantage is real. By creating a low-tax, relatively low-regulation refuge in the Northeastern United States, New Hampshire policymakers have delivered profound benefits for Granite Staters. 

From 1977-2019, New Hampshire’s economy grew by an astounding 335%. Massachusetts had the second highest economic growth in New England at 234%, a full hundred percentage points below New Hampshire.  The U.S. economy grew by 203% in those same years.

This growth has given Granite Staters the highest median household income in northern New England, 25% higher than Vermont’s and 35% higher than Maine’s. 

Over those years, however, officials in other states have watched and learned. They’re chasing — and often passing — New Hampshire.

After the eight states with no income tax are the nine states with a flat income tax. New Hampshire is in this group, which used to be very small but is growing rapidly. 

Five other states have passed legislation to move to a flat income tax. Others, including North Carolina, are phasing out their income taxes on the way to joining the elite group of states with no tax on income. 

Policymakers in these states are intentionally trying to keep their people, employers and entrepreneurs — and attract those in other states — by narrowing the gap between their tax burden and the burdens in states like New Hampshire. 

In other words, they are trying to put an end to the New Hampshire Advantage by creating a tax and regulatory environment more favorable than ours. 

Having the Interest & Dividends Tax on the books is hurting New Hampshire in this increasingly competitive landscape. Investors, retirees and many entrepreneurs know that they gain nothing financially by moving to New Hampshire because we tax their investment income. 

Even AARP has pointed out to its members that New Hampshire is a less desirable place to retire than Florida, Tennessee, Texas or any of the other truly income-tax-free states because we tax investment income. 

“Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — have no income taxes. New Hampshire, however, taxes interest and dividends, according to the Tax Foundation,” AARP’s website warned its members in a post last year. 

Turbotax warned its users in December that New Hampshire taxes passive income. After listing the states with no income tax, it noted that “New Hampshire limits its tax to interest and dividend income, not income from wages.”

Maintaining the Interest & Dividends tax creates a small but real drag on both economic and population growth. 

“Over the past decade, states which forgo income taxes have seen their populations grow at twice the national rate, and gross state product grew 56 percent faster in states without an income tax than it did in those with one over that period,” the Tax Foundation noted in 2021. 

As long as this tax remains on the books, it discourages relocation to New Hampshire by individuals who could use their assets to invest in local start-ups, commercial and residential real estate development, and local non-profits. 

It also chases away wealthier Granite Staters and retirees. When financially successful Granite Staters move to Florida and Tennessee to avoid the Interest & Dividends Tax, New Hampshire loses. 

The most commonly made objection to ending the Interest & Dividends Tax is that it would reduce state revenues. But i’s unclear how much revenue the state would lose.

Revenue from the I&D Tax has varied over the last decade. The tax brought in $93 million in fiscal year 2013, and fluctuated between a low of $79.8 million and a high of $96.9 million through fiscal year 2017. Since fiscal year 2018, the tax has generated more than $100 million in revenue annually, spiking to a record $157.5 million in fiscal year 2022. 

The 2022 revenue was driven by unusually large stock market gains that year.

Assuming annual revenues in the $100 million to $125 million range, the question is whether the state could weather the loss of those funds without making severe budget cuts. The answer is obviously yes.

For the last decade, state General Fund and Education Trust Fund revenues have exceeded budgeted amounts in every year save one. Revenues were $435.5 million above plan in FY 2022, $323.7 million above plan in FY 2021, $173 million above plan in FY 2019, $133 million above plan in FY 2018, $96 million above plan in FY 2017, $166 million above plan in FY 2016, $47 million above plan in FY 2015, $3.8 million above plan in FY 2014, and $45.7 million above plan in FY 2013.

In the last decade, revenues were below plan only during the pandemic year of 2020, when the sharp decline in business activity caused business tax and rooms and meals tax revenue to plunge. 

New Hampshire’s growing economy has already generated enough surplus state revenue to replace the I&D Tax receipts. 

And eliminating the I&D Tax would end a strong disincentive for higher-wealth individuals to live in New Hampshire. Making the state more attractive to investors and entrepreneurs would have positive economic effects, which would be felt in state revenues over time.

Accelerating the repeal of the I&D Tax would make New Hampshire more attractive to retirees, investors and entrepreneurs by the end of this year. If the state can afford to eliminate the tax now, why wait three years to enjoy the benefits of making New Hampshire more economically competitive?

One of the more important New Hampshire stories of the 2022 mid-term elections happened in Massachusetts, where voters approved a so-called “millionaires tax.” That vote represents a pivot back toward the old “Taxachusetts” days when Bay State lawmakers disregarded the interstate competitive effects of their tax policies.

When it takes effect, the “millionaires tax” will levy a punitive 4% tax rate on incomes of $1 million or more. That is on top of the state’s existing 5% income tax. This 80% tax increase for people who earn $1 million or more is likely to motivate a lot of people to seek shelter in places that don’t treat them as cash cows to be milked for the benefit of others.

Massachusetts abuts just one state that does not view people as resources to be exploited. That would be the live-free-or-die state. Accordingly, New Hampshire’s population of millionaires — and people who aspire to that status — should increase a bit in the near future.

The Center for State Policy Analysis at Tufts University estimated that the new tax will raise $1.3 billion next year for the People’s Republic of Massachusetts. That figure would be $2.1 billion, the center estimates, but tax avoidance strategies, including cross-border migration by high-income individuals, will cut the expected revenue by $800 million. 

“Together, cross-border moves and tax avoidance would reduce millionaires tax revenue by roughly 35 percent,” the center concluded.

The $1.3 billion figure represents about 2.5% of the Massachusetts state budget. Advocates argued that the state needed this additional money, even though revenues were so high in the last fiscal year that the state was required by law to return $2.94 billion of state surplus to taxpayers.

This was a revenue grab, not a necessary tax increase. Legislators (who initiated the proposal) wanted more money, but didn’t want to raise general taxes, so they singled out an unpopular minority for excessive taxation. 

Massachusetts residents who expect this revenue to go to roads and schools might be disappointed. The money goes into the general fund, not specifically to those causes. The Boston Globe observed that the narrower-than-expected margin of victory indicates a suspicion among voters that legislators will squander the money. 

“That the measure passed by such a narrow margin — about 52 percent to 48 percent — says more about voters’ mistrust of the Legislature to actually follow through on spending those tax dollars wisely than it does their concern for the state’s wealthier citizens,” The Globe wrote in an editorial after the vote. 

That’s not the only cause for concern. Massachusetts now has a graduated, not a flat, income tax. That creates precedent — and an invitation — for the introduction of other rates above 5%. 

It also represents a shift away from Massachusetts’ efforts to shed its “Taxachusetts” reputation and make itself more economically competitive in the Northeast. If it continues to move in this direction, New Hampshire could enjoy some of the spillover effects, in the form of fleeing investors, entrepreneurs and capital.