Lottery winnings are now tax free in the Granite State
Lotto sales in the state had been declining when the original law was passed and continued to drop during the brief time the tax was collected. A fiscal note estimates New Hampshire will see revenues drops $5 million in 2001-12 and $3.4 million each year after. Countering that were arguments that higher ticket sales, particularly to out-of-state buyers, would rise more than enough to negate the lost taxes.
Until Monday, the system for claiming winnings over $599 required multiple identification, a special lottery claim form, and advised winners, “to seek legal or financial advice” to ensure they complied with state and federal withholding of winnings. When the law took effect on July 1, 2009, a flurry of jackpot tickets were redeemed in the last possible days to avoid the tax. The federal tax, which begins at a 25% withholding rate, may endure but New Hampshire's Lottery Commission is celebrating the end of the state's tax with a "Tax Repeal Tea Party," a lotto game where the winner's federal taxes will be paid by the state.
In a way, New Hampshire has come full circle, since becoming the first U.S. State to sell lotto tickets in the modern era in 1964.