Granite Staters celebrate having no income tax and no sales tax — yet demand fully funded schools, maintained roads, mental health services, and affordable housing. The math has never added up. Now, the bill is coming due.
By Granite State Report
There is a peculiar cognitive dissonance that runs through the politics of New Hampshire like the Merrimack River runs through its industrial heartland. On one bank stands the state’s fiercely guarded identity: no income tax, no sales tax, a motto — “Live Free or Die” — that practically dares government to reach into a citizen’s wallet. On the other bank stands a mounting catalogue of unmet needs: schools ruled unconstitutionally underfunded by the state’s own Supreme Court, crumbling bridges, a housing affordability crisis, mental health services slashed to the bone, and property tax bills that leave seniors and working families gasping for air.
The question at the center of this investigation is not whether New Hampshire should adopt a broad-based tax — that is a political question Granite Staters have answered repeatedly and emphatically. The question is whether a state can sustain a modern, functioning society while systematically dismantling the revenue mechanisms needed to pay for it. The evidence, compiled from state fiscal data, court rulings, policy analyses, and the lived experience of residents from Coos County to the Seacoast, suggests the answer is no.
I. The Architecture of an Anti-Tax Identity
New Hampshire’s aversion to broad-based taxation did not emerge overnight. It is the product of a century of political culture, media influence, and ideological entrepreneurship that has hardened into something approaching state religion.
As the New Hampshire Business Review has documented, the roots of the state’s tax structure trace to the 19th century, when wealth was measured in farmland and factory machinery. An “antiquated tax system based on wealth, as wealth was defined in the 19th century,” as one historian described it, evolved through decades of political maneuvering. When Governor Walter Peterson attempted to modernize the tax system in the early 1970s — replacing the old stock-in-trade tax with a business profits tax as a first step toward comprehensive reform — the backlash ended his political career. The lesson was learned: in New Hampshire, proposing a broad-based tax is a career-ending act.
The conservative publisher William Loeb, whose Manchester Union Leader wielded enormous influence for decades, helped cement the anti-tax orthodoxy. Politicians who wished to survive had to sign “the pledge” — a promise never to support an income or sales tax. That tradition endures. Governor Kelly Ayotte, in a 2025 press release, warned her state would not be “MASSed up” with higher taxes — a reference to neighboring Massachusetts that serves as political shorthand for everything the Granite State defines itself against.
The culmination of this ideological project came on January 1, 2025, when New Hampshire fully repealed its Interest and Dividends Tax — the last vestige of any personal income taxation in the state. The 3% levy on investment income above $2,400 for individuals was eliminated after a phased repeal signed by Governor Chris Sununu. New Hampshire joined Alaska as one of only two states with neither an income nor a sales tax.
$0
State Income Tax as of 2025
$0
State Sales Tax
$6,855
Average Annual Property Tax Bill
50th
State Funding for Public Education (Dead Last)
Celebrations were enthusiastic. Americans for Prosperity held a mock funeral for the tax. The Josiah Bartlett Center for Public Policy reported that the repeal catapulted New Hampshire from sixth to third on the Tax Foundation’s State Tax Competitiveness Index. On paper, it was a triumph. In practice, it was the beginning of a fiscal reckoning.
II. The $150 Million Hole
The Interest and Dividends Tax was never the state’s largest revenue source. But at roughly $150 million or more in annual revenue — accounting for nearly 9% of General Fund receipts in its final full year — its elimination left a wound that has proven difficult to bandage.
Analysis by the New Hampshire Fiscal Policy Institute (NHFPI) found that by October 2025, state revenues were $29.4 million (4.0%) below the state revenue plan’s target, with the I&D Tax repeal a primary driver. The repeal resulted in a larger volume of refunds than expected, creating a net negative impact on the General Fund. By April 2025, Interest and Dividends Tax revenues were $57.1 million (66%) below April 2024 receipts.
“Every week, it seems, there’s a reminder of the sacrifices demanded in order to pay for the repeal, from the $15 million no longer going to beleaguered child care providers, to the hundreds of dollars in monthly Medicaid premiums now being charged to lower-income families.” — Dana Wormald, New Hampshire Bulletin, December 2025
The New Hampshire Bulletin catalogued the cascading consequences: $51 million in back-of-the-budget cuts to the Department of Health and Human Services, the gutting of the Office of the Child Advocate, limits on drought assistance for rural residents with dry wells, and the imposition of Medicaid premiums on lower-income families.
Combined with reductions in the Business Profits Tax (from 7.9% in 2018 to 7.5%) and the Business Enterprise Tax (from 0.75% to 0.55%), the Keene Sentinel reported the total revenue loss amounts to an estimated $500 million to $800 million during the current budget cycle.
And who benefited? According to the NHFPI, more than half of Interest and Dividends Tax revenue had been paid by households with over $200,000 in investment income — a figure that excludes wages, salaries, and capital gains. Nearly 90% of Granite Staters never even met the filing threshold. The repeal was, in effect, a tax cut for the wealthiest residents funded by service cuts affecting everyone else.
III. The Property Tax Trap: Paying More for Less
If the state isn’t collecting income or sales taxes, the money to fund services has to come from somewhere. In New Hampshire, that somewhere is your home.
New Hampshire has the fourth highest effective property tax rate in the country. When both state and local revenues are considered, property taxes account for roughly 65% of all government revenue — the highest reliance on property taxes of any state in the nation, according to Citizens Count. The median annual property tax bill is approximately $6,855, with the median effective rate around 1.61%.
The variation across municipalities is staggering. In 2025, property tax rates ranged from $5.39 per $1,000 of assessed value in New Castle to $25.17 in Brentwood. Manchester’s rate hit $19.58; Lebanon stood at $21.53. For a homeowner with a $400,000 property in a town with a $20 tax rate, that is $8,000 a year — before a single income or sales tax dollar is collected, because those taxes do not exist.
The cruelest dimension of this system is its regressivity. The NH School Funding Fairness Project documents that the poorest 20% of households pay approximately 6% of their income in property taxes, while the wealthiest 1% pay less than 2%. A recent Concord Monitor opinion piece noted that in many communities, property tax rates increased 9 to 10% annually from 2023 to 2025, while Social Security benefits and wages rose only 2.5 to 2.8% over the same period. For retirees on fixed incomes, these increases are nothing short of existential.
The Paradox, Illustrated
Two homes, both valued at $450,000 and just eight miles apart in the Concord area, carried drastically different school property tax bills — $6,500 versus $8,000. The difference: the tax rate needed to fund schools in the less property-wealthy community was significantly higher, because the state contributes so little to education.
Source: Valley News / NH School Funding Fairness Project
IV. Schools: Dead Last, and the Courts Have Noticed
Nowhere is the tax system’s failure more visible than in public education. According to the National Education Association’s 2025 annual report, New Hampshire property taxpayers pay 63% of the cost of public education — the highest percentage in the entire country. The state government contributes just 28.8%. Put differently: New Hampshire ranks dead last among all 50 states in state funding for public education.
This is not a new problem. It has spawned three decades of litigation. The landmark Claremont decisions of the 1990s established that the state constitution requires the government to provide an adequate education and fund it. Nearly 30 years later, the legislature has never fully complied.
In July 2025, the New Hampshire Supreme Court ruled in Contoocook Valley School District v. New Hampshire that the current level of education funding is inadequate, agreeing that the state should spend at least $7,356 per pupil — far above the $4,266 per pupil it was providing. House Republican leadership responded by declaring the decision “changes nothing.”
The consequences are tangible. Schools in Concord, Pittsfield, Rochester, and Claremont faced multi-million-dollar budget gaps in 2025. The Union Leader reported that Claremont’s school board asked for emergency legislation to access up to 75% of state adequacy payments early, effectively taking out a loan against future state aid. Goffstown and Londonderry delayed plans for full-day kindergarten due to budget constraints — making them the last two districts in the entire state still offering only half-day programs.
Meanwhile, wealthier communities like Hanover, Windham, and Bedford boast schools ranked in the top 10% nationally, with median household incomes above $160,000. The state’s education funding system, as the New Hampshire Bulletin put it, “creates ZIP code winners and ZIP code losers.”
V. Roads, Bridges, and the Infrastructure Deficit
Education is the most politically charged front in New Hampshire’s fiscal war, but it is far from the only one. The state’s physical infrastructure tells a parallel story of deferred maintenance and inadequate investment.
According to the American Society of Civil Engineers, New Hampshire’s roads, bridges, and rail lines each received a grade of C- in their most recent state assessment. Nearly 80% of all state-owned bridges were constructed before 1980. Over 650 bridges are more than 75 years old. The average state-owned bridge has reached or exceeded its planned 50-year functional life.
As of 2023, 115 of 2,160 state-owned bridges were on the “red list” — meaning they are in poor structural condition requiring more frequent inspections. For municipal bridges, 213 of 1,698 were on the red list. The Union Leader reported that the NHDOT had to delay several upcoming projects due to a $400 million shortfall.
The New Hampshire Fiscal Policy Institute documented that the state’s public transit funding ranked 49th in the nation. Only 34 of New Hampshire’s communities have a regular fixed bus route. For a state that prides itself on self-reliance, the irony is that inadequate transit forces residents into car dependency — and then underfunds the roads they must drive on.
A November 2025 report in the Laconia Daily Sun made the point even more starkly: New Hampshire is investing the least per capita in public infrastructure of any state in the country.
C-
ASCE Grade for Roads, Bridges & Rail
328
“Red List” Bridges (State & Municipal)
$400M
NHDOT Project Shortfall
49th
Public Transit Funding (Nationwide)
VI. The Human Cost: Mental Health and Safety Net in Crisis
Perhaps the most painful consequences of New Hampshire’s tax philosophy fall on those least equipped to advocate for themselves.
In late 2025, the Department of Health and Human Services, forced to absorb a $51 million back-of-the-budget cut mandated by the legislature, began slashing contracts: $1 million from NFI North, which provides mental health services to residents with serious mental illness; $2 million collectively from organizations providing home visits to pregnant women and at-risk families; $575,000 from family resource centers; and $100,000 from a cold-weather homeless shelter in Berlin.
The New Hampshire Public Radio reported that the House budget also reduced funding for community mental health programs by approximately $18 million per year below what Governor Ayotte proposed, and cut Medicaid provider rates by 3% across the board — totaling $52.5 million over two years.
Meanwhile, Business NH Magazine documented staggering disparities in access: Hillsborough County, the state’s most populous, had approximately one mental health provider for every 280 residents, while Rockingham County had one for every 350. Rural communities fared even worse.
A February 2026 Concord Monitor editorial described the situation plainly: “Emergency departments are overwhelmed, families struggle to find timely care, and too many Granite Staters fall through the cracks because services are fragmented, understaffed, or unavailable — especially in rural communities.”
The NAMI New Hampshire 2025 legislative recap noted that while some wins were secured — the reversal of drastic cuts to Medicaid provider rates and mental health funding — legislation providing long-term financial stability for 988 crisis call centers and wraparound services was voted down. The behavioral health crisis system remains funded through what New Futures described as “a patchwork of sources that do not offer long-term stability.”
VII. The Housing Affordability Vise
New Hampshire’s tax structure does not merely create gaps in public services — it compounds the state’s severe housing crisis. The median single-family home price reached $540,000 by May 2025, according to data from the Concord Monitor. That figure has more than doubled since 2014, when it stood at $227,500.
To afford that median home — spending no more than 30% of income on housing — a household would need to earn $182,000 per year. The actual median household income in New Hampshire is $95,628. Only about 15% of residents can comfortably afford the state’s median-priced home, according to New Hampshire Housing.
The rental market offers no relief. The National Low Income Housing Coalition reported that only 39 rental homes are affordable and available for every 100 extremely low-income households in New Hampshire, and statewide vacancy rates have hovered below 1% — compared to a national average of 6.6%. New Hampshire needs to build 60,000 new homes by 2030 to stabilize supply.
High property taxes make all of this worse. They increase the carrying cost of homeownership, discourage new construction, and make it harder for municipalities to invest in the water, sewer, and transportation infrastructure that new housing requires. Just 12% of New Hampshire’s buildable land has access to either water or sewer services, and less than 6% has access to both, according to NHPR.
VIII. The Paradox Made Plain
Here, then, is the paradox stripped to its bones: Granite Staters have collectively demanded a state with no income tax, no sales tax, and now, aggressively reduced business taxes. They have simultaneously demanded well-funded schools, safe bridges, plowed roads, mental health care, affordable housing, and the full complement of services that define a functioning society. These two demands are in direct mathematical conflict.
“You put this cap on a town, you know what’s going to happen? You are going to lay off police. You are going to lay off the fire department. You’re not going to get your streets plowed. This is a crisis.” — Rep. Kristine Perez (R-Londonderry), January 2026
The resolution, to the extent there has been one, is to push the burden downward — onto property taxpayers, onto municipalities, onto the families least able to bear it. The state provides the least education funding in the country, and homeowners make up the difference. The state underfunds mental health care, and emergency departments absorb the overflow. The state defers infrastructure maintenance, and future taxpayers inherit the compounding cost of neglect.
This is not abstract. It is a retired teacher in Laconia watching her property tax bill consume an ever-larger share of her Social Security check. It is a family in Claremont whose children attend a school district so financially strapped it sought emergency loans from the state. It is a first-time homebuyer in Manchester who qualifies for a mortgage but cannot absorb the $8,000 annual property tax on a starter home. It is a person in crisis in the North Country, 45 minutes from the nearest mental health provider, because the state cut the contract that kept a closer one open.
IX. What Would Reform Look Like?
Any honest discussion of reform must begin with an uncomfortable acknowledgment: the current system is not “no-tax.” It is high-tax, regressively structured, and poorly distributed. According to the Tax Foundation, New Hampshire collects $5,949 per capita in state and local taxes — not dramatically less than many states with income taxes. The difference is that it collects this revenue in the most inequitable way available, falling heaviest on homeowners of modest means.
Some proposals are already in motion. In October 2025, Republican Rep. Walter Spilsbury of Charlestown proposed more than quadrupling the Statewide Education Property Tax, raising roughly $1 billion more per year to redistribute education funding across the state. A January 2026 proposal would tax second homes and rental properties that sit vacant for half the year. A legislator introduced HB 503-FN to reinstate the Interest and Dividends Tax at 5%, with a significantly higher exemption threshold of $20,000.
None of these proposals has gained significant traction. The anti-tax orthodoxy remains powerful. But the fiscal math is tightening. A February 2026 Concord Monitor essay argued that the state must restore the Interest and Dividends Tax, increase business taxes to previous levels, and earmark the revenue for property tax relief — a straightforward proposal that would reduce the burden on homeowners while asking those with investment income to contribute modestly.
X. The Road Ahead
New Hampshire stands at a crossroads that has been decades in the making. The state’s Supreme Court has ruled its education funding inadequate. Its infrastructure grades are mediocre. Its mental health system is funded on a prayer. Its housing market is inaccessible to the majority of its own residents. And its primary revenue mechanism — the property tax — is simultaneously the most regressive and most overburdened tax in any state in America.
The “New Hampshire Advantage,” so often invoked, is real for a specific demographic: high-income earners with significant investment portfolios who own property in wealthy communities with low tax rates and excellent public services. For everyone else — the teacher, the nurse, the small business owner, the retiree, the young family trying to buy a first home — the advantage is increasingly illusory.
Living free, it turns out, is not free at all. Someone always pays. In New Hampshire, the question has always been who — and the answer, with growing clarity, is: those who can least afford it.
The Granite State’s citizens will have to decide, eventually, whether the anti-tax identity they have so carefully constructed is worth the services, infrastructure, and opportunities it increasingly requires them to forfeit. That reckoning may not come this year, or next. But as the revenue shortfalls widen, the court orders pile up, the bridges age, and the property tax bills arrive, the math will do what the politics has so far refused to: force a choice.
“Thirty years ago, New Hampshire had what was considered one of the best systems in the country. We know where lack of investment or disinvestment can land us, and here we are.” — Kimberly Stearns, Director, NH Bureau of Mental Health Services
Sources & References
- New Hampshire Department of Revenue Administration. “Repeal of NH Interest and Dividends Tax Now in Effect.” January 2025. revenue.nh.gov
- Josiah Bartlett Center for Public Policy. “Killing the I&D Tax Leaps N.H. to No. 3 on National Tax Competitiveness Index.” October 2025. jbartlett.org
- New Hampshire Fiscal Policy Institute. “October Revenues Set Back by Interest and Dividends Tax Repeal.” November 2025. nhfpi.org
- New Hampshire Fiscal Policy Institute. “Households with High Incomes Disproportionately Benefit from Interest and Dividends Tax Repeal.” April 2023. nhfpi.org
- New Hampshire Fiscal Policy Institute. “No Clear Signal of Revenue Improvements from April as Next State Budget Looms.” May 2025. nhfpi.org
- Wormald, Dana. “New Hampshire lost a fortune with a tax repeal, but I bet the wealthy spent it on lots of cool stuff.” New Hampshire Bulletin. December 2025. newhampshirebulletin.com
- Keene Sentinel Editorial Board. “Interest and Dividends: Cutting a tax that only wealthy Granite Staters paid has left everyone else on the hook.” January 2026. keenesentinel.com
- WHAV / InDepthNH.org. “NH Continues to Shift Education Funding to Local Property Taxpayers.” April 2025. whav.net
- New Hampshire Bulletin. “In New Hampshire, the public education fight offers a clear view of the state of the union.” March 2025. newhampshirebulletin.com
- NFIB. “New Hampshire Supreme Court Weighs In on Statewide Property Tax.” July 2025. nfib.com
- Union Leader. “NH Schools Face Heightened Financial Pressures.” December 2025. unionleader.com
- New Hampshire Bulletin. “After Supreme Court school funding decision, Republican floats fix: increasing property taxes.” October 2025. newhampshirebulletin.com
- American Society of Civil Engineers. “New Hampshire Infrastructure Report Card.” infrastructurereportcard.org
- Union Leader. “Getting There: Fixing New Hampshire highways exacts a higher toll.” October 2025. unionleader.com
- NHFPI. “New Hampshire Policy Points 2025: Transportation.” February 2025. nhfpi.org
- Laconia Daily Sun. “New Hampshire Is Investing the Least in Public Infrastructure.” November 2025. laconiadailysun.com
- New Hampshire Bulletin. “NH Health and Human Services axes $4.3M in contracts in response to steep budget cuts.” December 2025. newhampshirebulletin.com
- NHPR. “‘Hit from all sides right now’: Proposed budget cuts could strain NH’s safety net health system.” April 2025. nhpr.org
- NAMI New Hampshire. “2025 NH Legislative Session Recap.” September 2025. naminh.org
- New Futures. “2025 Strengthening Crisis Care.” new-futures.org
- Business NH Magazine. “Amid Crisis, NH Begins to Transform its Mental Health System.” businessnhmagazine.com
- NHFPI. “New Hampshire Policy Points 2025: Housing.” February 2025. nhfpi.org
- National Low Income Housing Coalition. “2025 New Hampshire Housing Profile.” March 2025. nlihc.org
- Valley News. “New Hampshire home prices soar, incomes lag behind.” September 2025. vnews.com
- NHPR. “NH housing production reached 20-year high in 2025, but still falls short of demand.” February 2026. nhpr.org
- Tax Foundation. “New Hampshire Tax Rates & Rankings.” taxfoundation.org
- Citizens Count. “Property Taxes | NH Issue Brief.” citizenscount.org
- NH School Funding Fairness Project. “Property Taxes.” fairfundingnh.org
- NH Business Review. “Why NH has no income tax.” March 2019. nhbr.com
- Concord Monitor. “New Hampshire citizens demand property tax relief.” February 2026. concordmonitor.com
- New Hampshire Bulletin. “Behold, another nonsolution to New Hampshire’s school funding nightmare.” October 2025. newhampshirebulletin.com
- NHPR. “Bill to require NH voters to decide on local tax caps gets a hearing — and lots of criticism.” January 2026. nhpr.org
- NHPR. “NH lawmakers consider proposals to tax second homes and rental houses.” January 2026. nhpr.org
- Valley News. “With a lack of state funding for education, NH property taxpayers bear the brunt of costs.” December 2023. vnews.com
- Concord Monitor. “A path forward for New Hampshire’s mental health crisis.” February 2026. concordmonitor.com
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