How AFP helped end all income tax in New Hampshire
New Hampshire is now income tax-free, and Americans for Prosperity-New Hampshire is a big reason why.
In 2020, New Hampshire citizens were struggling with the devastating economic effects of the pandemic. Job losses, supply chain disruptions, and inflation were hitting families hard. To relieve the pressure, AFP-New Hampshire made it their mission to eliminate the Granite State’s only income tax — a tax on interest or dividends.
In 2021, the state passed legislation to phase out the 5% tax. By 2023, the tax rate had dropped to 4%, followed by a reduction to 3% in 2024, before its complete elimination in 2025.
Why New Hampshire?
New Hampshire’s official state motto is “live free or die,” so it’s no surprise that it’s home to a strong free-market activist network, improving the prospects of a grassroots movement for tax reform.
Additionally, when cutting taxes, efficient use of the remaining revenue becomes crucial. Careful fiscal scrutiny has earned New Hampshire the distinction of having the best taxpayer ROI in the country.
As of January 1, 2025, New Hampshire has officially joined Alaska as one of only two states with no income tax and no sales tax.
Critics claimed that cutting the tax would only benefit the super-wealthy.
The reality: Over 60% of tax filers paid $500 or less annually in interest and dividends taxes. Given the 5% rate at the time, this means their dividend and interest income was under $10,000 per year. Eliminating this tax represents real relief for regular New Hampshirites.
As taxes fell, the economy in New Hampshire boomed. This resulted in the lowest unemployment rate in the state’s history.
Another criticism was that cutting taxes without cutting spending can have negative results, but cutting taxes on the state level isn’t like cutting taxes on the federal level, where you have to worry about the government turning on the money printer to cover the shortfall, resulting in inflation. States can’t print their own money. When revenues fall, one way or another, spending will go down.
But even that assumes that revenue falls at all. With the economic boost caused by this and other tax cuts, revenue actually rose despite the lower rates.
How did AFP-New Hampshire help free the state of its only form of income tax?
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Grassroots mobilization: When it comes to achieving change in a democratic system, nothing beats talking to voters one-on-one. From door-knocking to phone banking, AFP-New Hampshire’s grassroots army rallied public support to drive home the message: Tax cuts benefit everyone.
- Strategic partnerships: AFP-New Hampshire’s success showed how important it can be to work closely with local grassroots organizations. In particular, the Free State Project was a major factor behind this win.
The Free State Project is a political migration movement with the goal of concentrating libertarians into New Hampshire to influence state policy through activism and voting. Those who moved to the state for just this reason are often known as “free-staters.”
In addition to providing a huge base of grassroots energy to work with, many of AFP’s top activists are originally free-staters themselves. The total victory over income taxes could not have been achieved without them.
- Engaging policymakers: AFP-New Hampshire’s team worked with Gov. Chris Sununu, state House Majority Leader Jason Osborne, and other policy champions to ensure the phase-out stayed on track.
Below, you can see Rep. Osborne at the podium during an AFP event — a mock funeral for the interest and dividends tax.
We spoke with Osborne, and he confirmed the vital role AFP-NH played:
“AFP-NH has long been a key partner in our most important legislative initiatives, the I&D tax repeal among them. Without AFP-NH’s outreach and education efforts, we would not have had the public support to make NH finally income tax free.”
Or, as Executive Councilor John Stephen put it:
“AFP’s leadership and grassroots engagement were crucial in getting this policy across the finish line.”
New Hampshire’s triumph doesn’t need to be a one-off. These tactics can be applied nationwide.
If you want to learn more about how AFP-New Hampshire effectively works to achieve policy victories just like this one — or want to get involved yourself — visit AFP-New Hampshire today.
