Biden administration argues that states can tax non-resident telecommuters

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Siding with Massachusetts in a lawsuit brought by New Hampshire, the Biden administration on Wednesday told the U.S. Supreme Court that states could justify taxing non-resident telecommuters. 

New Hampshire sued Massachusetts in October over the Bay State’s effort to collect income taxes from Granite Staters who used to cross the border for work but had to switch to telecommuting during the pandemic.

The bulk of the Biden administration’s legal brief on behalf of Massachusetts addressed technical legal questions, primarily whether New Hampshire is the right party to bring the suit and whether it’s proper for the Supreme Court to take it. Media reporting of the administration’s brief focused on these issues.

But further down in the 18-page document, Acting Solicitor General Elizabeth Prelogar argued that a state could legally and constitutionally tax telecommuters who never physically entered the state’s borders. 

“New Hampshire correctly observes (Br. in Support 25-30; Reply Br. 10-13) that a New Hampshire resident who works from home will rely on New Hampshire services like police and fire protection,” Prelogar wrote. “Yet that resident’s work also may continue to depend on and benefit from services provided by Massachusetts. For example, Massachusetts and its municipalities might provide similar protections to the infrastructure and staff critical to the work of the New Hampshire resident who is temporarily working from home—such as computer servers that enable and store the employee’s work product, courts that enforce contracts, and financial institutions and transactions necessary to the work.

“And the employer located in Massachusetts, where the employee worked before (and may well return after) the pandemic, will continue to benefit from the services Massachusetts affords in the interim, thus helping to sustain the employee’s continued employment during that temporary period. A telecommuting employee’s physical location thus need not map precisely onto the location of the governmental services needed to support that employee’s work.”

Under Prelogar’s theory, a state would be justified in taxing the incomes of all people who work for a local company, regardless of where on the planet they live, because that state’s services benefit the employer, thus “helping to sustain the employee’s continued employment…”

The Biden administration’s interest in New Hampshire’s lawsuit clearly goes far beyond mere legal technicalities. The administration has sided with Massachusetts on the merits and has signaled that the U.S. government sees nothing wrong, either morally or constitutionally, with a state’s cross-border taxation of non-resident telecommuters. 

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N.H. remote workers face taxation without representation

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By Andrew Cline and Robert Alt

When Massachusetts Gov. Charlie Baker declared a state of emergency on March 10, 2020, many New Hampshire residents who were commuting to the Bay State began working from home instead.

Ordinarily, Massachusetts could not continue withholding taxes from these workers’ paychecks while they were not working in the Bay State. But under a new Baker administration rule, out-of-state remote workers were required to continue paying income tax to Massachusetts—a state where they do not live, cannot vote, and no longer work.

Remote-working Granite Staters were understandably outraged. As was New Hampshire Gov. Chris Sununu. Accordingly, New Hampshire Attorney General Gordon MacDonald filed an original jurisdiction case with the U.S. Supreme Court to protect Granite Staters from Massachusetts’ unconstitutional money-grab. Fourteen other states, along with several public interest groups including The Buckeye Institute, have urged the high court to hear this consequential case.

New Hampshire v. Massachusetts should matter to anyone who works from home or employs remote workers. Teleworking has skyrocketed during the pandemic, with approximately half of Americans now working from home, according to a recent study by the Brookings Institution.

Software giant Salesforce.com, the largest private employer in San Francisco, recently announced that most of its employees would continue to work remotely after the pandemic, and that the company would shrink its physical office space, as a leading indicator that American work and commuting patterns are changing for the long term.

This shift to remote work started well before the pandemic and benefits employers and employees alike. It enables employers to attract top-notch talent from outside of their immediate geographic area. It gives employees the flexibility to locate their households in more affordable or otherwise preferable areas. And it saves everyone money.

A Global Workplace Analytics study found that those who work remotely half the time can save nearly $11,000 per year for their employers and between $2,500 and $4,000 per year for themselves.

The remote-work revolution can also help bridge the growing urban-rural economic divide. People who work from home are almost twice as likely to earn a six-figure salary compared to the general population, and small towns and rural areas stand to profit substantially if more high-income earners relocate there while telecommuting to work for employers in larger metropolitan areas.

Some government officials have lauded the shift to telework, and even encouraged it. As Gov. Baker himself said, “Now as we look to the weeks and months ahead, we’re urging businesses to continue to promote remote-work and work from home as much as possible.”

The governor, it seems, wants to have his cake and eat it too—advising Granite Staters to stay home at the same time he taxes them as though they didn’t.

If being taxed without representation weren’t enough, Massachusetts—home to John Hancock and the Boston Tea Party—wants to levy taxes for unused services, too.

Being taxed where you work makes sense only because the taxing jurisdiction generally incurs commuters’ wear-and-tear burden on its roads, utilities, community services, and infrastructure.

But absent the commuter presence and burden to pay for the same, there is no good reason—short of greed—to tax telecommuters’ wages while they have no say or vote on the tax or the election of its assessors.

If Massachusetts prevails in New Hampshire v. Massachusetts, other states and jurisdictions will quickly adopt a similar soak-the-teleworker tax policy. In Ohio, for example, cities are already taxing the income of remote workers who used to work there, but are now working elsewhere.

Income taxes should be paid by people who live or, at the very least, actually perform work there.

Working from home is here to stay. Employers and employees have both learned to adapt and adjust their budgets to meet the demands of that new normal. Governments should, too.

Unconstitutional taxes levied upon the income of those who have no vote is neither just nor sustainable given our new post-pandemic realities—and Massachusetts (of all places) should know better.

Andrew Cline is president of the Josiah Bartlett Center for Public Policy in Concord. Robert Alt is president and CEO of The Buckeye Institute in Columbus, Ohio. This column was originally published in The Lowell Sun. 

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State business tax cuts have not led to a reduction in state revenue

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Many people believe that cutting tax rates always and automatically lowers government revenue. They believe this even when shown that it isn’t true. 

When House Bill 10, a bill to continue reducing the Business Profits Tax and Business Enterprise Tax rates, had its turn in the House Ways & Means Committee on Thursday, the predictable objection was made. Opponents said it would reduce state revenue. 

But this prediction was made before every business tax rate cut in the last five years. It has yet to prove true. 

In 2015, Gov. Maggie Hassan predicted that the business tax rate reductions put into place by the Legislature starting in the 2016 fiscal year would blow a $90 million hole in the upcoming two-year state budget. 

To quote Harry Doyle, that prediction was just a bit outside. Business tax revenues were $132.8 million (23.4%) above plan in FY 2016 and $72.7 million (12.9%) above plan in FY 2017. Instead of a $90 million budget hole, the state wound up with $205.5 million more than planned. 

The trend continued for the next two years. Business tax revenues were $118.8 million (17.9%) above plan in FY 2018 and $151.6 million (23.2%) above plan in FY 2019. 

In those four years, business tax revenues exceeded budget projections by a combined $475.6 million. 

So after the state began cutting business tax rates, business taxes generated almost half a billion in unplanned revenue in just four years— an enormous windfall. 

But what about the four years before? Surely the economy, and with it state revenues, were growing rapidly before the tax cuts.

Business tax revenues were $13.1 million above plan in FY 2012, $33.7 million above plan in 2013, $11.5 million below plan in 2014, and $6.5 million below plan in 2015. 

After the state cut business tax rates, business tax revenues took off like a cheetah that wandered into a Nigerian hacker hangout and ransacked the entire stash of Red Bull. 

In 2017, the Office of Legislative Budget Assistant projected that the additional business tax rate reductions passed in 2017 would cause an $11 million reduction in business tax revenues in FY 2019. Business tax revenues came in $151.6 million above plan that year. 

It would be a mistake to attribute all of those revenue gains to the state business tax cuts. Other factors, such as national economic growth and federal tax changes, played a large role, as the Sununu administration has pointed out. 

But one also cannot attribute all of those gains to the national economy. From 2016-2019, the U.S. GDP grew by 9.3%, while New Hampshire’s grew by 11.6%, according to Federal Reserve figures. 

Not long ago, New Hampshire had the highest business tax rates in New England. Thankfully, that is no longer true, though our rates are higher than notoriously high-tax Rhode Island and Connecticut.

Despite recent reductions, our business tax rates remain very high. We are near the bottom — 41st in the country — in the Tax Foundation’s ranking of corporate tax rates.

High business tax rates have been shown to have a negative effect on business startups, job creation, productivity, and economic growth. Pushing New Hampshire’s high rates down a bit more would, at the very least, increase our economic competitiveness and make us more attractive to employers. It also would improve the atmosphere for small-business startups.

As the state’s experience since 2016 shows, it is a mistake to assume that further business tax rate reductions would trigger automatic state revenue reductions. All recent predictions that this would happen have proven false. 

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N.J. legislators ask to join N.H. tax lawsuit against Massachusetts

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Three days after New Hampshire sued Massachusetts to stop it from taxing the income of remote workers, a New Jersey Senate committee passed a bill requiring their state treasurer to explore joining the suit. If New Jersey joins, New Hampshire will have started a multi-state effort to stop high-tax states from reaching across their borders to tax non-resident commuters. 

Last week, Massachusetts adopted a new administrative rule allowing it to collect income taxes on New Hampshire residents who work remotely for Massachusetts companies. On Monday, New Hampshire sued in federal court, calling the practice unconstitutional. But Massachusetts isn’t the only state to do this, and other states have taken notice of New Hampshire’s suit. 

For decades, New York State has applied its income tax to people who work remotely for New York companies. Hundreds of thousands of New Jersey and Connecticut residents have to pay New York income taxes even if they don’t physically commute into the state.

New Jersey state Sen. Declan O’Scanlon told the Josiah Bartlett Center that the New Hampshire lawsuit could bring justice for New Jersey residents too. 

“The lawsuit between New Hampshire and Massachusetts may very well pave the way to helping make the case,” he said.

O’Scanlon is co-sponsor of a bill that would require New Jersey’s treasurer to study the commuter tax issue and make a report to the state legislature. On Thursday, the N.J. Senate Budget and Appropriations Committee unanimously amended the bill to instruct the treasurer to explore joining New Hampshire’s lawsuit.

The bill then unanimously passed the committee. Its next step would be a vote before the full Senate, O’Scanlon said.

He and the bill’s prime sponsor, Sen. Steven Oroho, had been interested in pursuing a fight against New York for a while, O’Scanlon said.

“I had a couple of people send me stories about the New Hampshire lawsuit, knowing I have an interest in this,” he said. 

“There is no logical explanation of why we wouldn’t pursue our residents paying New Jersey taxes rather than New York taxes.”

A spokesman for the New Jersey treasurer was unavailable for comment, but O’Scanlon said the effort has bipartisan support and the governor’s office has taken notice. 

“I am hearing from within the Murphy administration that there is interest in this,” he said. 

When the bill gets to the full Senate, O’Scanlon said he doesn’t foresee any serious opposition.

“It should be like a hot knife through butter,” he said. “It will help our taxpayers and enhance our revenue. Not often do you have an issue that lines up like that. “

New Jersey allows residents to take a tax credit for income taxes paid to New York. So New York’s taxation of commuters costs New Jersey lots of money. Senators on the Budget and Appropriations Committee speculated that the cost could be in the billions of dollars. 

Edward Zelinsky, who teaches tax law at Benjamin Cardozo School of Law in New York City, told the Josiah Bartlett Center that New Jersey and New Hampshire are in the same position. 

“I believe it’s identical. From a constitutional perspective and a tax policy perspective, the issues are the same,” he said. 

“If the employer is in New York or in Massachusetts and you are at home in Connecticut or in New Hampshire, their position is that you owe income taxes. 

“Now, in fact, New York has gone very aggressively. New York is not just sending tax bills to people in Connecticut. New York has sent tax bills to people in Tennessee, in Arizona. Their position is that they can overstep the boundaries and send tax bills to anyone they want. In Massachusetts, they are technically saying the same thing.”

Zelinsky, who lives in Connecticut and works some days in New York City, sued New York over this issue in 1994 and lost in the New York state courts. The U.S. Supreme Court refused to take up the case.  But he said that legal scholars have come to see his — and New Hampshire’s — position favorably.

“I lost in court; I won in the arena of academic opinion,” he said.

In its lawsuit, New Hampshire states that “Massachusetts has unilaterally imposed an income tax within New Hampshire that New Hampshire, in its sovereign discretion, has deliberately chosen not to impose.”

The suit states that its purpose is “to rectify Massachusetts’ unconstitutional, extraterritorial conduct.”

Zelinsky said the constitution favors New Hampshire, but the big question is whether the Supreme Court will hear the case. That will be up to the discretion of the justices. But he will be among the many commuters and remote workers pulling for the Granite State.

“I’m saying very openly that I’m cheering New Hampshire on.”

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Smokers, Mass. lawmakers may have saved N.H. businesses from tax hike

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Cigarette smokers and flavored tobacco scavengers from Massachusetts produced a surge of New Hampshire tobacco tax revenue that almost single-handedly prevented a business tax increase, preliminary, unaudited state figures suggest.

State tobacco tax collections rose significantly in March, April and June, putting tobacco tax revenue $14.5 million (7.3%) higher than budgeted and $13.7 million (6.9%) higher than last year, according to the Department of Administrative Services’ June revenue report. 

Revenue from the federal tobacco settlement was $2.9 million above plan, for a total tobacco-related increase over budget projections of $17.4 million. Preliminary, cash figures suggest that the state missed triggering an automatic business tax hike by $15.35 million. 

In the last state budget, lawmakers included a provision that would trigger automatic business tax hikes if state general and education fund revenue fell at least 6% below projections. Based on June’s cash figures, revenues appear to have fallen 5.4% below projections. These are preliminary figures, however, and are subject to revision when adjustments are made based on the state’s later, more thorough accounting of the year’s revenues.

If these figures hold, business owners could reasonably thank smokers and Massachusetts lawmakers for helping to prevent those automatic tax hikes. Tobacco tax revenue was 34.6% above budget in June, 34.9% above budget in April, and 10% above budget in March.

Department of Revenue Administration staff say those increases are most likely caused by smokers stocking up for the first lockdown and in anticipation of a second lockdown, combined with Massachusetts residents crossing the border to buy flavored tobacco. 

Massachusetts banned the sale of flavored tobacco products, including flavored snuff and chewing tobacco, effective June 1. In addition to a cigarette sales surge, state tobacco tax data show a large increase in smokeless tobacco sales, particularly snuff, in June. 

Sales of what the state classifies as “other tobacco products,” meaning everything excluding cigarettes and premium cigars, have spiked in recent months, surpassing 7% of all tobacco sales in June. 

A sizable portion of that is likely related to the Massachusetts ban on flavored tobacco products. In addition to flavored smokeless tobacco, the ban also includes menthol and other flavored cigarettes as well as flavored vaping products. 

New Hampshire budget writers expected to supplement state revenues this year by applying the tobacco tax to electronic cigarettes. Last year, legislators expanded the tobacco tax to cover e-cigarettes, even though there is no tobacco in e-cigarettes. 

The tax went into effect on January 1, but it has produced less revenue than expected. By the end of the state’s 2020 fiscal year on June 30, taxes on e-cigarettes had generated just $1.2 million. 

Legislators budgeted $5.7 million in revenue from e-cigarette sales for Fiscal Year 2021, which began on July 1. Based on the first six months of collections this year (covering the final half of Fiscal Year 2020), that projection seems unrealistic. Collections so far suggest that the state could expect to bring in less than half what it projected to take from e-cigarette sales in FY 2021.  

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Don’t celebrate dodging business tax hikes just yet

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On Monday, the Josiah Bartlett Center reported on our website (which you should read religiously because you’re smart and you want to drop impressive knowledge on unsuspecting strangers at cocktail parties, whenever we can have those again) that preliminary state revenue figures suggest there won’t be automatic business tax hikes for the 2021 fiscal year. 

The key word there is “suggest.” A business tax increase is still a possibility, if a remote one.

Last year’s state budget contained a provision that would trigger a Business Profits Tax increase of 2.6% and a Business Enterprise Tax increase of $12.5 percent if state General and Education Fund revenue fell at least 6% below projections. 

State collections for June, the final month of the fiscal year, show that General and Education Fund revenues fell below plan for the year by 5.4%. But the June report is based on cash collections as of the end of June. The numbers are always adjusted later, and the totals are not final and official until the audited financial report is released in December. 

We looked back at state revenue reports through 2007 (the last year for which reports are posted online) and found five years between 2007 and 2019 in which there was at least a $20 million difference between the June cash report and the final audited revenue figures.

The differences are as follows:

2008: $20.4 million

2010: $78.5 million

2012: $27.2 million

2016: $67 million

2019: $-25.1 million

Only in 2019 was the audited figure lower than the June cash figure, and most of that change (more than $16 million) was attributable to business tax refunds. But there was a drop of about $9 million not related to tax refunds. 

If the final, audited General and Education Fund revenues for FY 2020 are lower than June’s reported revenues by $15.35 million, the tax increases would be triggered. 

That would be an unusually large drop, but it’s not unprecedented. Businesses face the prospect of spending the next six months in tax-rate limbo, which can affect hiring and other spending plans. 

If you’re uncertain whether your taxes are going to go up, you’re more likely to save cash and avoid hiring, especially since payroll makes up the largest share of the Business Enterprise Tax, which is scheduled to rise by 12.5% if the revenue trigger is met. 

Legislators had the chance to remove this uncertainty and repeal the tax-hike trigger. But, hoping for a tax increase, they refused. 

We’ll have a better idea of the situation in a few weeks, when the state releases June preliminary accrual report. That’s a follow-up report to the June cash report. It includes a fuller financial picture and tends to be much closer to the final, audited report released in December.

For now, business owners and managers should keep the celebrations on hold.  

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N.H. businesses just miss automatic tax increase, state data suggest

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New Hampshire businesses will not suffer automatic tax hikes early next year, new figures released by the Department of Revenue Administration suggest.

A provision in last year’s state budget would have triggered automatic business tax increases if general and education fund revenue fell at least 6% below projections for the 2020 fiscal year. The newly released numbers for the end of the 2020 fiscal year show a 5.4% decline.

Had revenue fallen another $15.35 million, the tax hikes would have been triggered. But higher-than-anticipated collections from the tobacco tax ($14.5 million), insurance taxes ($9 million, the lottery ($2.9 million) and the tobacco settlement ($2.9 million) slowed the decline and kept revenue from hitting the -6% trigger. 

Though interest and dividends revenue for the year was 6.8% less than projected, an $11.7 million increase this June vs. last June helped slow the overall revenue slide.

The numbers are not final until audited at the end of the calendar year. Still, these official but unaudited numbers offer some much-needed good news for New Hampshire employers.

“If this holds true after the audited figures have been released, every business in New Hampshire will have dodged a bullet.” Jim Roche, president of the Business and Industry Association, New Hampshire’s statewide chamber of commerce, told the Josiah Bartlett Center. “With all the struggles businesses are experiencing as they come back from the COVID-19 pandemic, higher taxes are the last thing they need.”

“Legislators should have taken this tax-hike trigger off the books when employers asked,” Andrew Cline, president of the Josiah Bartlett Center for Public Policy, said. “Instead, legislators gambled with the livelihoods of many small business owners and their employees. Though employers seem to have gotten lucky, they should’ve been able to rely on their legislators, not Lady Luck.” 

The numbers are contained in the Department of Revenue Administration’s June Monthly Revenue Focus report, which tallies the state’s revenue for June and for the entire fiscal year, which ended June 30th. 

The report shows business tax revenue to be 14.6% lower than projected. The Business Profits Tax was down 14.7% and the Business Enterprise Tax 14.3%. 

The Meals and Rentals Tax was 11.6% below projections, and the Interest and Dividends Tax 6.8% below. 

The Tobacco Tax posted a 7.3% gain over projections, and the Insurance Tax a 7.2% gain.

A surge in Tobacco Tax revenue is particularly notable. The June report notes a 56% increase in tobacco stamp sales (which means cigarettes) in June 2020 vs. June 2019. The state saw a similar spike, of 50%, in March. 

When compared to the 2019 fiscal year, 2020 general and education fund revenues fell by 7 percent, with business taxes leading the decline.

The state experienced a 19.3 percent drop in business tax revenue from 2019, with Business Profits Tax revenue falling by 16.5% and Business Enterprise Tax revenue falling by 23.6%. 

Meals and Rentals Tax revenue was down 6.5% from 2019, and proceeds from the Interest and Dividends tax were down 4.6%. 

The Tobacco Tax posted the biggest increase year-over-year, showing a 6.9% gain.

Amid all of the gloomy figures, the monthly numbers for June offer some encouraging news. June revenues — led by tobacco, interest & dividends, liquor, utility property and business profits — were higher than last June’s by a total of $1.4 million.

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After brutal 2020, tax hikes could loom for N.H. businesses in 2021

EDITOR’S NOTE: The original essay posted yesterday used numbers given to the House Ways & Means Committee by the Department of Revenue Administration, which included only taxes collected by that department. It has been updated to include the remaining revenue sources covered by the tax increase triggers. The more complete figures show a tax increase to be likely but less certain than the previous figures suggested. This essay has been revised accordingly.

The House on Thursday rejected a Republican proposal to prevent significant business tax increases that are likely to hit on January 1. Unless legislators act between now and the end of the year, New Hampshire businesses that survive 2020 should prepare to begin paying higher tax rates in 2021. 

The tax increases were built into last year’s state budget compromise. The budget contained triggers that would increase the Business Profits Tax by 2.6% and the Business Enterprise Tax by 12.5% if state revenues fell by at least 6% below official estimates in Fiscal Year 2020.

The state’s 2020 fiscal year closes at the end of this month. The Department of Revenue Administration in late May projected that total state revenues would fall by a little more than 10% below estimates by the end of June for the taxes it collects. A later analysis of total tax and fee revenue monitored by the Department of Administrative Services put all collections at 4.3% below plan at the end of May. 

The state is very close to hitting the tax increase trigger, but it’s not a certainty yet. 

Some legislators don’t seem to understand that if the triggers are met, the increases will take effect at the beginning of next year. We’ve seen some comments that the increases won’t hit businesses until 2022.  

The tax increases will go into effect for “all taxable periods ending on or after December 31, 2021,” the Department of Revenue Administration states in its guidance for businesses. The tax year ending on Dec. 31, 2021 starts on Jan. 1, 2021. 

Unlike individual federal income tax filers, businesses pay estimated state taxes quarterly. So they will begin making their estimated tax payments for the 2021 tax year in the first quarter of 2021, not in April of 2022. 

It’s not certain, but it appears likely that New Hampshire businesses that survive the 2020 lockdown and recession will be hit with significant tax increases in the beginning of next year. The determination of whether the increases happen will not come until the state releases final revenue figures in December.

Legislators who don’t wish to damage New Hampshire employers with another financial hit after the brutal first half of 2020 can remove this threat, and the anxiety it’s causing employers, by repealing the triggers. 

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Addicted to tax revenue: The potentially dangerous rush to raise the vaping tax

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The state’s first vaping tax took effect on January 1, just nine weeks ago. On Thursday, the House approved a bill to more than quadruple it. But the revenue is unlikely to be the bill’s biggest effect.

House Bill 1699 raises the tax on the liquid used for e-cigarette vaping to 40% of the wholesale price. The current rate is 8% for open systems (fill your own) and 30 cents per milliliter for closed systems (cartridges). 

On a 12-8 vote, the House Ways & Means Committee asserted that the increase was justified because of the potential negative health effects of nicotine contained in vaping liquid.

“The nicotine delivered by electronic cigarettes is a toxic addictive chemical derived from the tobacco plant,” Rep. Richard Ames, D-Jaffrey, wrote for the committee. “We know it is addictive. But we don’t yet fully understand the extent of the damage to vital human organs, particularly the lungs and heart, that may be caused by its inhalation through the vaping process. We don’t yet know its effect on the human brain, particularly its effect on the still developing brain of a young person.”

But nicotine researchers have repeatedly pointed out that nicotine should be treated as less harmful than tobacco smoking.

“We need to de-demonize nicotine,” Ann McNeill, professor of tobacco addiction at the Institute of Psychiatry, Psychology and Neuroscience at King’s College London, told Scientific American in 2015.

The reason is that switching from cigarette smoking to vaping produces dramatic reductions in health risks and has been associated with declines in tobacco use.

A study McNeil published in 2018 concluded that the health benefits of switching to e-cigarettes were so profound that e-cigarettes should be prescribed by doctors as smoking-cessation tools. 

“When people smoke tobacco cigarettes, they inhale a lethal mix of 7,000 smoke constituents, 70 of which are known to cause cancer. The constituents in tobacco smoke that cause the harm are either absent or at much lower levels… in e-cigarettes so we are confident that they are substantially less harmful than cigarette smoking,” McNeil told the BBC.

“People smoke for the nicotine — but contrary to what the vast majority believe, nicotine causes little if any of the harm. The toxic smoke is the culprit and is the overwhelming cause of all the tobacco-related disease and death.”

The health argument being used for HB 1669 perpetuates the misconception that there’s little difference in the health risk between tobacco smoking and vaping. 

In fact, there’s a huge difference, and a growing body of research shows that vaping helps smokers quit, leading to improved health outcomes. A study published in the New England Journal of Medicine last year found that e-cigarettes “were more effective for smoking cessation than nicotine-replacement therapy, when both products were accompanied by behavioral support.”

The presence of nicotine in vaping liquid plays a significant role in helping smokers make the switch from tobacco to less-harmful e-cigarettes. A 2016 National Institutes of Health study and a 2015 Society for Research in Nicotine and Tobacco study found that smokers preferred e-cigarettes with higher nicotine content, suggesting that e-cigarettes with higher levels of nicotine helped people quit smoking by offering a satisfying substitute for tobacco. E-cigarettes with lower nicotine levels were less effective. 

Were the state leaving people alone to make their own decisions, the health outcomes would be a matter of individual choice. But in this case legislators are attempting to use the tax code for the express purpose of changing people’s behavior.

That puts the government on the hook for the outcomes. Given the strong link between vaping and smoking cessation, any government effort to discourage vaping would likely lead directly to worse health outcomes for smokers. 

Because the research showing vaping to be an effective smoking cessation method is well publicized, skeptics might conclude that a more powerful motivation for such a tax would be the revenue. (As with nicotine, collecting and spending tax revenue can be habit forming.)

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Lonely (for now) legislators push sales, income taxes

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A bill to tax sales of electronics in New Hampshire made news this week, and the bemused media coverage it drew was justified. Yet New Hampshire Union Leader State House Bureau Chief Kevin Landrigan saw a different, and more important, angle.

Landrigan put the bill in context and showed that it was one of several attempts to raise tax revenue through broad-based taxation.

The bigger story was not that a lonely representative proposed a kooky sin tax on consumer electronics (House Bill 1492). It was that a few legislators are trying to lay the groundwork for the eventual imposition of broad-based sales and income taxes.

Rep. Robert Schamberg, D-Wilmot, is the sole sponsor of CACR 17, a constitutional amendment to mandate that any broad-based tax “be enacted solely for the purpose of reducing property taxes by the same amount of revenue as raised by such tax.”

Sen. Jeanne Dietsch, D-Peterborough, is the sole sponsor of Senate Bill 474, to rename the state’s interest and dividends tax the “income tax on interest and dividends.”

Technically, the interest and dividends tax is a tax on income. But a mere technical clarification is not the point of the bill. The point is to undermine resistance to direct state income taxation.

“We need to see ourselves as a state in which half the people do pay income tax, a third pay interest and dividends and about a fifth pay half a billion dollars of income tax a year to Massachusetts to help educate not New Hampshire’s children but others,” she told the Senate Ways and Means Committee on Wednesday.

Each of these bills would serve the same common purpose, which is to lower resistance to broad-based taxes, making it easier to pass large-scale sales and income taxes in the future.

That there were only four sponsors among all three bills shows just how few legislators were willing to spend political capital on a doomed charge up a mountain. Still, the bills also show that hardcore support for sales and income taxes is alive and active in the Legislature.

Some legislators are particularly persistent. Sen. Dietsch last year introduced a payroll tax on income above $132,900 and helpfully clarified precisely what kind of tax it was.

“This is an income tax,” she said.

She gets full marks for determination and perseverance.

The persistence of these legislators raises another question. How would such bills fare were they not destined for the hands of a willing executioner?

The current governor has made clear he will veto a sales or income tax. That dampens enthusiasm in the Legislature for spending energy on such efforts. But one of his potential challengers announced last year that he would not take The Pledge.

The prospect of having an income or sales tax bill signed into law rather than immediately vetoed would be highly likely to change legislators’ calculus. This year, such bills are met with derision. That might not always be the case.

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