John Lynch's Income Tax

Over 200 people turned out to protest Governor Lynch's job-killing LLC tax at a public hearing hosted by the Department of Revenue Administration.

"John Lynch broke his pledge when he signed a budget that imposes this job-killing income tax on New Hampshire’s small business owners," said Governor Sununu. "Governor Lynch saw the outrage produced by his failure to keep that commitment."
 
“This LLC tax reminds voters that John Lynch is unwilling to stand up for the small business owners who create jobs and drive New Hampshire’s economy.”

John Lynch and the Democrat Majority in Concord have increased taxes on small business owners a staggering 13.5%! Such an increase on small businesses will limit the ability of small companies to raise capital, expand, or hire new employees. Thus, limiting their ability to create the very jobs we need to climb out of this economic recession.

What they're saying about Gov. Lynch's job-killing income tax:

Marcy Vierzen, the owner of Artisan's New London LLC writes for the Concord Monitor that:

This tax specifically targets Main Street, New Hampshire, and is not spread evenly across the state populace. Aside from financial risk innate in creating and building a small business, small business-owners have already been deeply affected by this difficult economy, often relinquishing compensation, endless time and energy in the interest of maintenance and growth of their LLCs.

 

No matter what kind of political or legal rhetoric the politicians may use in an attempt to justify this new law, the residents of New Hampshire are far too intelligent to call this anything other than an income tax. Unfortunately, the majority of New Hampshire's Democrats, led by Rep. Susan Almy, have placed the burden of that income tax exclusively and squarely on the shoulders of small-business owners.

 

As an avid supporter of small business, the heart and soul of New Hampshire, I urge all citizens to contact their state legislators and the governor and demand that they repeal the LLC tax.

The Union Leader writes:

All LLCs pay, and have always paid, state business taxes. It is incorrect to suggest, as some have, that LLCs avoid taxation in New Hampshire. The state never applied the interest and dividends tax to LLCs that have nontransferable shares because the state had always considered any "dividends" collected by the owners to be the equivalent of compensation for work performed. Therefore, to tax it would be to impose an income tax.

Now, however, the state is after as much revenue as it can collect. So the state says LLC owners must pay the interest and dividends tax on any "dividends" they earn that exceed what would be considered "reasonable compensation" for their work. Who will determine what "reasonable compensation" is? The state, which gets a cut of whatever sum it deems "unreasonable."

The excuse for this tax expansion was "fairness." The real reason was to grab revenue. When the state decides it wants more revenue, there will be other expansions, also in the name of fairness. This will not end unless the people we elect to run the state decide that growing our economy is more important than growing the government.

Read the full article here.

The Portsmouth Herald writes:

Roy Aboody and Anita Jordan couldn't join 200 other people in Concord for public testimony Wednesday on rules expanding the interest and dividend tax to limited liability companies. But the two owners of local LLC firms share a bond of strong opposition to the revenue-enhancing measure that was part of the state budget passed in June.

"Instead of cutting spending, the Legislature took the easy out. But they didn't consider the long-term negative impact on small businesses who are the backbone of the economy," said Aboody, president of Stratham-based Staffing Sense.

"I feel like we are getting nickel and dimed to death," said Anita Jordan, who runs Jordan Signature Heating in Exeter with her husband, Bill. "We've only got four people on payroll, and it's getting harder to take care of them when they hit us with another 5 percent tax. We might as well work for someone else."

Read the full article here.

NHPR reported:

The frustration and resentment with state government was palpable at a hearing on a new business tax in Concord...Most speakers warned the measure will have huge economic and political consequences if the measure goes forward.

Read and listen to the full article here.

Foster's Daily Democrat reports:

The leaders of numerous Seacoast area chambers of commerce have banded together to express frustration with a new tax law they say was passed without proper public input and could deeply impact small businesses.

Some feel legislation that makes the distributions from some limited liability companies subject to a 5 percent interest and dividends tax, is little more than a veiled attempt to gouge New Hampshire small businesses that make up the backbone of the state's economy.

...Don Doney, owner of Portsmouth-based Axis Business Solutions LLC, was among a handful of small business owners who showed up to a gathering that aimed to raise awareness of a law that was passed in June in the late hours of the final day of the legislative session.

"It's an income tax. Just call it that because that's exactly what it is," Doney said.

Wednesday's gathering was organized by Exeter Area Chamber of Commerce President Michael Schidlovsky with members of the Dover, Somersworth, Rochester and Portsmouth chambers all attending along with a representative from the New Hampshire chapter of the National Federation of Independent Business (NFIB).

Schidlovsky said local business owners and chamber leaders are frustrated that the new LLC tax was passed late at night with little input and is now in the hands of a DRA that has scheduled no Seacoast public hearings on implementation.

The Exeter Chamber president has submitted a letter to DRA Revenue Counsel John Hayes conveying his and other group's concerns about their lack of input.

Read the full article here.

New Hampshire Business Review reports:

The Business and Industry Association of New Hampshire has added its voice to the chorus of those seeking a fast-track repeal of the extension of the state’s 5 percent interest and dividends tax on distributions from LLCs and partnerships.

“The debate over this tax expansion has shifted in recent weeks from a public policy discussion to a political and rhetorical football,” said BIA President Jim Roche. “The absence of input from anyone – let alone small businesses most affected by this provision – when the tax extension was added to the state budget in June has led to too much distrust, confusion, frustration and misunderstanding.”

According to Roche, “fundamental review and fairness were omitted in the passage of this tax.” He criticized the lack of an “open, public hearing process” last June, when the tax change was inserted as a last-minute revenue-raiser to help balance the state budget.

“Those who would be affected by the extension of the 5 percent interest and dividends tax on LLC and partnership distributions should have had the opportunity to speak to legislators in an open, public hearing process,” said Roche.

Read the full article here.

David Heath, a CPA and directore of tax at Melanson Heath & Company, writes for The Union Leader:

The Legislature's recent expansion of the interest and dividends tax to payments that partnerships and LLCs make to their owners will undermine New Hampshire's ability to attract small business owners and the jobs they create.

More than 32,000 small businesses account for 96.6 percent of New Hampshire's employers and 54.9 percent of private sector employment, according to the Small Business Administration. As an accountant in Nashua for more than a quarter century, I have advised hundreds of entrepreneurs on how and where to establish and grow their small businesses. I believe that the 2009 tax law will severely compromise New Hampshire's tax competitiveness unless the Legislature quickly remedies its flaws.

...Add the 2009 tax law and small businesses face a "tax double whammy" that will kill small business growth. Prior to the 2009 tax law, when DRA audits of partnerships and LLCs converted deductible "compensation" into taxable "profit," the tax rate increased from .75 percent to 8.5 percent. But now, the amount recharacterized as "profit" will also be treated as a "dividend" subject to the 5 percent income and dividends tax. Taxing the audited "profit" at the 8.5 percent BPT rate and again as a "dividend" at the 5 percent income and dividends tax rate means a combined tax rate of 13.5 percent.

Read the full article here.