State House

Revenue chief airs tax ideas

Mortgage refinance, LLC loopholes are hot topics
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With days to go before lawmakers are supposed to finish the state budget, New Hampshire Revenue Commissioner Kevin Clougherty yesterday presented lawmakers with a smorgasbord of tax ideas that could help close a $150 million budget gap.

The biggest-ticket items: taxing mortgage refinancing and closing loopholes on limited liability corporations.

For weeks, lawmakers working to finalize the state's next budget have extolled the idea of a "third way," new ideas for fees, fines and taxes that don't involve two lightning-rod plans: the Senate plan to permit - and tax at a 49 percent rate - 13,000 video slot machines in the state and the House plan to implement a new 5 percent tax on capital gains. The House-Senate panel negotiating the 2010 and 2011 state budget is supposed to finish Thursday.

Clougherty's refinance tax presentation, however, quickly attracted lightning bolts, with senators asking whether the tax would hurt those who are already struggling, whether it would increase the cost of home ownership and whether the revenue in the proposal could be relied upon. Gov. John Lynch's office has quietly vetted the refinance idea for a couple of weeks; the state Mortgage Bankers and Brokers Association came out against it Thursday.

"This has been floated for a couple of weeks now in the media, and I don't think I've talked to anyone anywhere" who likes the idea, said Berlin Republican Sen. John Gallus, who said he sees many people refinancing properties to keep their homes, send a child to college or pay for emergency home repairs.

Manchester Democrat Lou D'Allesandro panned the refinance tax idea after the hearing.

"That's the one I don't see. . . . I don't see it as an alternative when we have other alternatives that are better," said D'Allesandro, pointing to the plan he sponsored to allow a total of 13,000 video slot machines spread between the state's three horse and dog tracks and two North Country slot parlors. D'Allesandro estimates the plan would bring in $205 million for the state's two-year budget, which will total about $11.5 billion.

Clougherty laid out a variety of scenarios for a refinancing tax, with rates ranging from 0.75 percent to 1.5 percent and with flat exemptions ranging from zero to $100,000.

A refinancing tax of 1 percent, for example, with an exemption of $100,000 would bring in about $52 million a year for the state. On an $185,000 home, that tax would cost a homeowner $850, or $4.83 per month over the life of a 30-year mortgage.

Clougherty also recommended an array of exemptions, including for those who have reverse mortgages, those in the middle of a divorce, and those participating in New Hampshire Housing Authority foreclosure-avoidance programs or in the new federal programs, Making Homes Affordable and Hope for Home Ownership.

House Finance Committee Chairwoman Marjorie Smith said she remains open to the idea of taxing refinancing or limited liability companies.

"I'm just keeping an open mind," said Smith, a Durham Democrat. She said she's open to combinations of different revenue sources but that expanded gambling remains a nonstarter for her, citing the long opposition of the House to any expanded gambling effort.

The idea of expanding taxes on limited liability corporations met a considerably warmer reception at the hearing. About 10,000 businesses have filed as LLCs, Clougherty said.

When LLCs distribute earnings to their members, those earnings are not subject to the state's interest and dividend tax, while dividends distributed to the shareholders of corporations are taxed.

"Currently under New Hampshire law, distributions of profits in corporations are taxed while similar distributions to LLC members are not," Clougherty said.

At this point, budget negotiators are considering three big-ticket revenue-raising ideas, each of which has some fierce opponents: permitting slot machines (state's projected take: $205 million over the two-year budget), taxing refinanced mortgages (which could bring in as much as $199 million over the biennium, depending on the rate and exemptions) or taxing capital gains (projected to bring in $75 million over the biennium). (next page »)

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Insulting

As usual, Abe has nothing more than a moronic comment to offer. Perhaps if he were disabled himself he'd give some thought to one of his smartaleck comments before spewing. But then again, nothing I've seen here gives any indication that Abe thinks about anything at all. He just spews!

R. St.Lawrence's picture

Just What NH Needs More Taxes

When is Concord going to wake up, you cannot keep taxing people. People cannot afford to live now, Property taxes out of control and now you want to add more taxes just what the ecomony needs. We need casinos to bring in more money, jobs etc. You have already screwed the disabled retired employees far beyond their means, let alone other retirees.
We would like to know what benefits disabled people get from the state. we applied for food stamps, medicaid and etc we were turned down on everyone of them. We could only get $300.00 last winter for heat, boy that went far. May NH lawmakers, and the Governor make big money, but we do not and neither does most state retirees. I don't know how many times you have been told to build a larger liquor warehouse and start housing the liquor and trucking it yourself instead of paying a private co to do this in Nashua. Also get read of private consultants hired by the state. But of course as always someone has ones hand in someones pocket.

hersheybear's picture

Hey Abe

You posted about cuttng payments to the Disabled. What payments do the disabled (including me) get on the state level? Please let me know so I can apply for money from the state.

armyvet's picture

I don't know...must be some.

I don't know...must be some. Don't you get free parking with your handicapped stickers? How about health care for the kids? Maybe help with the food and the rent? (You know that was posted just for you. You like the attention).

Honest Abe's picture

Sad

Mr. Clougherty,

In regardless to taxing charitable organizations, did you also suggest finding a way to tax the local homeless people as well?

I have a feeling you threw out as many ideas as you could so if one or two stuck you would look like someone who knew what they were talking about. Sadly we know better. I wonder how many favors with Lynch you had to pull to get this job.

Dashboard Confessional's picture

Agree

I agree with all of these posts on this "Pick your Pocket" news item. By the way, another big time Tea Party will be held at the State House Steps on July the 4th. Come and show our tax and spend crew they are on their way out of their offices including our Grass Roots (Mass.) Gov.

armyvet's picture

Great idea

Let's CUT payments to the disabled. That should save a few million.

Honest Abe's picture

Abe's First CUT

Horray for Abe....he finally offered up his first CUT - a SPEND and TAX liberal can actually offer up a CUT. I have asked him repeatedly to offer up a cut and today he decided to go for the disabled - way to go

sailmaker's picture

Lynch is a great Governor in tough times

"The States affairs are in shambles under Lynch, the sooner we acknowledge this we have a chance to survive."

Shambles? Lynch's leadership has kept this state moving through the recession. Just look at the budget problems states across the country are having - they are bankrupt! Our deficit is minuscule, and Lynch is keeping his pledge of not having an income or sales tax. Lynch deserves a lot of credit for meeting obligations that were made long before he took office (education funding, pensions, etc.) and still keeping the budget from increasing by less than the rate of inflation.

No elected official is perfect, but I can't think of a leader I would rather see in the Governor's office right now.

Mr. Independent's picture

Our Budget is one of the worst in the country

Mr. Indy:

Please do your homework. NH is listed as one of the top 10 worst deficits in the country, including cities and States. yes our dollar amount is small compared to Say Cali or NY City, but as a percentage of the total amount, it's huge. Lynch has done nothing to get the economy back on even ground and his support of so many new and higher taxes shows desire to only help the tax and spend 10% over the 80% in the middle

Yankee's picture

Revolution

Perhaps it is high time for a revolution in this state. The Constitution allows it.

Damkeeper's picture

Not Only

Not only in our state but our whole country also. The tax and spend crew are now in charge of our state and our whole country. It's way pass time for a Revolution. By a Revolution I mean it's way pass time to kick them all out of office.

armyvet's picture

They need to change this mans title to tax collector!

Remember in Biblical times that tax collectors were on the same footing at prostitutes but had much less respect for the obvious reasons. If Phil Blatsos was still COR we would not be in this poor of situation to begin with. The States affairs are in shambles under Lynch, the sooner we acknowledge this we have a chance to survive.

factfinder4u's picture

Commissioner Kevin: Please honor your RSA 92:2 oath!

So Kevin http://www.revenue.nh.gov/about/commissioner.htm :

Who is your federal* tax collector?

That's right, you heard me correct. Check it out: neither the collectors, in the plural with the letter s, to call for and obtain payment of the state AND federal taxes, "shall at the same time hold the office of governor" etc.

You're now saying: Say What!? Yup: see Article 95, Part 2 of the New Hampshire Constitution: http://www.nh.gov/constitution/oaths.html for The "Incompatibility of Certain Offices" in that THIS" is distinguishable from THAT, being also: "any person holding any office under the United States".

Yeah! You thought that whenever any federal agent from Washington demands tax money from an individual it is O.K.!? No! Here in this state it is un-constitutional. Unlawful! This Article 95 was written on June 2, 1784 and even though the 16th Amendment was added to Article I, Section 8, Clause 1 of the U.S. Constitution for un-uniform taxes on February 25, 1913 the manner or HOW of collecting from WHO has NOT changed.

So who in this state collects FOR the Feds? Not WHO in the federal government collects FROM the citizens in this state! Look at it in this push-pull way of doing business. Who pulls from us? A state or federal officer? HOW is the federal government supposed to get their money from us? Directly? No! Indirectly through this state agent who tries to pull it from us who then pushes it to there.

And to there is WHERE? Some branch office, like the IRS in Portsmouth? Do they have our Art. I, Sec. 8, Clause 17 U.S. Constitutional "Consent"? No! There is no N.H. RSA Ch. 123:1 filing from them as required by their own Title 40 U.S. Code Section 255 that the U.S. Attorney is supposed to honor! but who operates in disgrace!

[ See: http://www.gencourt.state.nh.us/rsa/html/IX/123/123-1.htm and http://www.oscn.net/applications/oscn/deliverdocument.asp?citeid=393575 plus http://www.usdoj.gov/usao/eousa/foia_reading_room/usam/title9/crm00664.htm respectfully also: http://www.givemeliberty.org/RTPLawsuit/Misc/PressStatementSchulz9-16-03... being: "Adams v. United States (1943) 319 US 312, 87 L Ed. 1421, 63 S. Ct. 1122. (Quoted from U.S. statute 40 USCS 255, Interpretive Note #14, citing the US Supreme Court)" of: "In view of 40 USCS 255, no jurisdiction exists in United States to enforce federal criminal laws, unless and until consent to accept jurisdiction over lands acquired by United States has been filed in behalf of United States as provided in said section, and fact that state has authorized government to take jurisdiction is immaterial." Reference our "Consent" offered on June 14, 1883, as not a gift, but for an exchange, that never happened BELIEVE IT OR NOT!

So my suggestion is that everyone who has been tricked to pay these federal taxes has been un-protected by that last sentence in Article 12, Part 1st, N.H. Constitution & Bill of Rights.[ http://www.nh.gov/constitution/billofrights.html of: "Nor are the inhabitants of this state controllable by any other laws than those to which they, or their representative body, have given their consent."] They ought to get their money back from these thieves and to the 7th degree!!!!!!! Then maybe with some bills from them to the Feds of the statement of charges, for its return, that when returned by payment thanks to your tax receiver / collector finally doing his job, that x% of such could be taxed sort of like paying a commission to a Bounty Hunter to get your own property back.

Now WHO will take the first step in contacting the State Police for their Art. 12 pro-tection at the state level for law-forcement? WHAT company CEO will say: "Enough is enough, we have stock-holders who expect us to operate according to the law, and not as to participate with "outlaws"!"

Commissioner Kevin: Please honor your N.H. R.S.A. Chapter 92:2 oath of office. http://www.gencourt.state.nh.us/rsa/html/VI/92/92-2.htm I'll say thank you when you do your job of to oversee this collector / receiver.

JosephSHaas's picture

Hey Kevin, Heres an idea

Hey Kevin,

Heres an idea that maybe foreign to you. Since most of us taxpayers are cutting back to survive this economic depression, wouldn't it be prudent for the state to do the same? I mean, after all, you do work for us. We do pay your salary. My pay has been cut 1/3 over the last 2 years and I have to work harder just to pay my bills and keep my head above water. Let me remind you that unless the state stops treating us tax payers like a never ending ATM, we will treat you like a revolving door and keep on voting in people until we get the right ones in place who understand how to manage expenses correctly. Wake up and do the right thing.

NHForever's picture

Those who favor taxing the

Those who favor taxing the dividends distributed by LLCs refer to the measure as closing a loophole. But, your reporter and editors should know better. The dividends of LLCs are taxed prior to distribution by the Business Enterprise Tax, which was designed to tax firms that escape the Business Profits Tax by distributing their "profits" to partners. Once distributed, the dividends represent personal income. If NH taxed personal income as it should, but failed to capture such distributions, then there would be a loophole to close. But, as it stands this proposal, along with the Interest and Dividends tax on investment income, is another iniquitous means of taxing the income of some rather than all.

Mystery Tramp's picture

As usual

Instead of raising more taxes, how about if you cut back on spending! You halfwits in the statehouse make me sick!

R. St.Lawrence's picture

Don't miss this