Americans for Tax Reform President Grover Norquist joined Drew Cline, a prominent radio show host and president of the Josiah Bartlett Center for Public Policy, on The Morning Update to discuss a new state law accelerating the phase-out of New Hampshire’s income tax – a major victory for taxpayers that bolsters similar efforts in states around the country.
“New Hampshire is often said to be a no income tax state – unless you have a 401(k), or an IRA, or you own stocks or a house,” noted Norquist. “Now it’s going to be one of the 8 that truly have no income tax.”
While the state currently levies no taxes on wage income, New Hampshire does impose a 4% tax on interest and dividends income. That tax will finally disappear for good on January 1, 2025, thanks to Gov. Chris Sununu and remarkable Republican leadership this year in a narrowly divided legislature.
Norquist also observed the contrast between New Hampshire and Washington State, which recently lost its status as a no income tax state despite its state constitution prohibiting taxes on “everything, whether tangible or intangible, subject to ownership.”
“The Supreme Court of Washington had many times, 3 or 4 times, struck down efforts to have income taxes,” said Norquist. “The constitution is very clear – you’re not going to get an income tax in this state.”
Nevertheless, the state Supreme Court overturned a lower court decision to uphold legislation enacted in 2021 that imposes a 7% capital gains tax. Such taxes are considered to be income in all 41 other states that levy them.
Even so, Norquist pointed out that Washington state is an outlier on income tax reform. In addition to New Hampshire, he said, “there are 12 other states that have an income tax that are committed to going to zero.”
One way that states are accomplishing this goal is via revenue triggers – laws that require rate cuts if tax collections exceed a certain amount.
“Most states are actually now following the model of North Carolina, which is to “trigger” tax cuts,” remarked Norquist. “As income comes in – because the population grows, the economy grows – some of that money can be used to cut the income tax. So if you have a recession and you don’t get growth that year, then you don’t get an income tax cut.” Since 2013, this model has brought tremendous savings to North Carolinian taxpayers, slashing the income tax rate from 7.75% to 4.75% today.
Examples of other states following in New Hampshire’s footsteps to eliminate their income tax are Kentucky, Iowa, Nebraska, Oklahoma, Louisiana, and Arkansas. In the state of Arizona, Norquist said, Republicans recently moved to a 2.5% flat tax and now “intend to put on the ballot a constitutional initiative to take that down to zero over a number of years.”
Meanwhile, “in South Carolina, both the Republican and Democrat [running for] governor said we are going to go to zero,” praised Norquist. “That was pretty amazing.”
Those 12 states, however, remain far behind New Hampshire in the race to zero. By the time 2024 draws to a close, residents of the Granite State will not pay a dime in income or sales taxes – a reality that is sure to attract hundreds of thousands of new residents fleeing tax-and-spend regimes, especially in neighboring Northeastern states. Lawmakers across the country will look to New Hampshire as a prime example of pro-growth, pro-taxpayer policy.
“There are a lot of states that look at New Hampshire’s success and are moving in the same direction,” Norquist concluded. Radio show host Drew Cline agreed: “New Hampshire’s not alone, and we’ve got to be aggressive in cutting our taxes, because we’ve got a lot of states running after us.”