Valley News – New Hampshire's May state revenues see continued declines in major tax revenue sources

Revenue collected by the state of New Hampshire in May was on par with what state budget writers planned to collect, but the target was met in a way that hints at potential challenges for future revenues.

Key sources of revenue growth in recent years, notably the state business tax and the real estate transfer tax, have lagged expectations, and the revenue sources currently generating surpluses are likely to be temporary.

The combined revenue of the General Fund and Education Trust Fund in May was $141.7 million, which was on par with the state revenue plan’s $141.2 million for May.

May is not a critical month for state revenues, as significant business tax revenues are paid on a quarterly basis, and most of the revenues associated with annual tax returns for 2023 will already be paid in 2024.

With revenues equal to planned amounts in May, the total surplus for these two funds reached $141.9 million (5.0 percent above expectations) with one month remaining in state fiscal year (SFY) 2024.

The two largest drivers of state tax revenue growth in the three years following SFY 2019, including the start of the COVID-19 pandemic, were the combined occupation tax and the real estate transfer tax. Combined occupation tax revenue alone brought in $453.3 million (56.2 percent) more revenue in SFY 2023 than in SFY 2019. Real estate transfer tax revenue peaked in SFY 2022, bringing in $79.7 million (52.1 percent) more than the revenue collected during SFY 2019.

Both of these revenue sources have declined significantly. The state has a severe housing shortage, limiting the number of taxable transactions under the real estate transfer tax, while price increases raise revenue. National corporate profit growth has stagnated, and cuts in New Hampshire business tax rates have also reduced revenue over time.

The 12-month average of real estate transfer tax revenue collected by the state has lagged consumer inflation in New England, when both are measured relative to 2018.

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This shows that real estate transfer tax, despite substantial increases in previous years, now provides less purchasing power to the public coffers than in 2018.

The decline in real estate transfer tax revenues in recent months may be slowing or stopping, as increased prices and for-purchase inventory that is not declining as quickly as in recent years may stabilize overall transaction values. While real estate transfer tax revenues in May were $2.7 million (16.9 percent) below state revenue plan expectations, they were $1.7 million (14.7 percent) above May 2023 revenues, and both the number of transactions and transaction values ​​were reported as higher.

However, business tax collections in May remained about 34 percent behind planned amounts and last year. So far for SFY 2024, combined business tax revenue was $17.9 million (1.7 percent) below the state revenue plan, and $52.7 million (4.8 percent) below last year.

Though May is not a significant month for commercial tax revenue, June collections are usually significant and will provide more information.

Offsetting these deficits, revenue growth and the state's revenue surplus continue to arise primarily from two temporary revenue sources. First, is interest paid to the state on its operating cash balance of approximately $2.75 billion through the end of April 2024. The higher cash balance is due partly to recent surpluses and partly to one-time federal funds that have come to the state associated with the U.S. Congress' response to the COVID-19 pandemic. Second, is higher revenue from the interest and dividend tax, which is a tax on income generated by property ownership and is paid primarily by higher-income Granite Staters. Both interest on the state's cash holdings and interest and dividend tax revenue have been boosted by higher interest rates, which are likely temporary. More directly affecting future revenue changes from these sources, the interest and dividend tax is scheduled to be repealed next year under current law, and the state is likely to spend down its cash holdings over time, including by reducing interest payments on cash holdings ahead of key federal deadlines.

Although key revenue sources may outperform current trends in the future, the sources of state revenue growth have changed substantially over the past two fiscal years. Business tax revenue, which the state has relied on for revenue growth for most of the past decade, appears to be slowing, and real estate transfer tax revenue has partially recovered. The current revenue surplus is supported by two sources that are likely temporary, and other revenues appear to have limited or mixed revenue growth relative to prior year figures. Policymakers seeking to fund services may face greater challenges in 2025 when preparing the state budget than they have had to in the past ten years.

These articles are being shared by partners of the Granite State News Collaborative. Visit for more information.

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