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Valley News – New Hampshire state revenues in May show continued decline in key tax revenue sources

While New Hampshire’s May revenue collections were in line with the budget target, they achieved that target in a way that suggests potential problems with future revenue collections.

Important sources of revenue in recent years, in particular corporate taxes and the state’s real estate transfer tax, have fallen short of expectations, and those revenue sources that are currently generating surpluses are likely to be only temporary.

Total revenues for the General Fund and the Education Trust Fund in May were $141.7 million, virtually equal to the state revenue plan for May of $141.2 million.

May is not a crucial month for government revenues because significant corporate tax revenues are paid out quarterly and most of the revenues related to the 2023 annual tax return have already been paid out in 2024.

With May revenues meeting budgeted amounts, the combined surplus of these two funds was $141.9 million (5.0 percent above expectations), one month before the end of the 2024 state fiscal year (SFY).

The two largest drivers of state tax revenue growth in the three years following fiscal year 2019, which included the onset of the COVID-19 pandemic, were combined business taxes and real estate transfer taxes. Combined business tax revenues alone raised $453.3 million (56.2 percent) more in fiscal year 2023 than in fiscal year 2019. Real estate transfer tax revenues peaked in fiscal year 2022, growing $79.7 million (52.1 percent) more than fiscal year 2019 revenues.

Both revenue sources have declined significantly. The state is struggling with a severe housing shortage that is limiting the number of taxable transactions under the real estate transfer tax, although price increases are boosting revenue. Corporate profit growth has plateaued nationwide, and New Hampshire’s reduction in business tax rates has also reduced revenue over time.

The 12-month moving average of state property transfer tax revenues in New England has lagged behind consumer inflation when both measures are taken for 2018.

This suggests that, despite its significant increase in previous years, the real estate transfer tax is now bringing less purchasing power into the state coffers than in 2018.

The decline in real estate transfer tax revenues may have slowed or stopped in recent months as increased prices and a less rapidly declining inventory of purchase offers 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 reportedly higher.

However, business tax revenues in May fell about 34 percent short of the budgeted amount and the previous year. For fiscal year 2024, combined business tax revenues so far have been $17.9 million (1.7 percent) below the state revenue plan and $52.7 million (4.8 percent) below the previous year.

Although May is not a crucial month for corporate tax revenues, June revenues are typically quite high and provide more insight.

These deficits are offset by the state’s revenue growth and revenue surplus, which continue to come largely from two temporary sources of revenue. The first is interest paid to the state on its operating cash balance of nearly $2.75 billion as of the end of April 2024. The high cash balance is partly due to recent surpluses and partly due to one-time federal funds received by the state in connection with the U.S. Congress’s response to the COVID-19 pandemic. The second is higher revenue from the Interest and Dividends Tax, a tax on income from the ownership of assets paid largely by the state’s higher-income citizens. Both interest on the state’s cash balance and interest and dividends tax revenue have been boosted by higher interest rates, which are likely temporary. The interest and dividend tax, which more directly affects future changes in revenue from those sources, is scheduled to be eliminated next year under current law, and the state will likely draw down its cash balances over time, including before important federal deadlines, thereby reducing interest payments on the cash balances.

While key revenue sources may perform better in the future than current trends suggest, the sources of state revenue growth have shifted significantly over the past two fiscal years. Business tax revenues, which the state has relied on for revenue growth for most of the past decade, appear to be slowing, and real estate transfer tax revenues have declined in part. The current revenue surplus is supported by two sources that are likely temporary, and other revenues appear to be experiencing either limited or mixed revenue growth compared to last year’s numbers. Policymakers seeking to fund services may face greater challenges in crafting the state budget in 2025 than in most of the past decade.

These articles are shared by partners in the Granite State News Collaborative. For more information, visit

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