Federal tax data shows changes in how Granite Staters earn income – New Hampshire Business Review

First published in NH Business Review, May 10, 2024

Individuals had until April 15, 2024, to file their 2023 tax returns with the U.S. government. While information from those returns is not available yet, data from 2018 through 2021 provides insights into how Granite Staters make money.

An average of 727,450 federal individual income tax returns, of which about 38% were joint returns and 51% single returns, were filed annually in 2018-2021 based on earnings from New Hampshire’s approximately 1.1 million adults. Average total adjusted gross income (AGI), which reflects income after certain modifications, was $65.2 billion annually; for context, the fiscal year 2021 state budget was $6.55 billion. Salaries and wages comprised 66.6% of total AGI, while taxable interest and dividends comprised 5.2%, net capital gains were 10.1%, and net business, profession, partnership or S-corporation income reported on individual tax returns totaled 7.7%.

However, this source distribution changes substantially for the highest income filers. For New Hampshire filers reporting more than $1 million in AGI, salaries and wages were only 30.3% of income, while interest and dividends were 10.1% and net capital gains were 42.3%. Net business, profession, partnership or S-corporation income reported was a combined total of 16.4% of income collected by these high-income filers.

The 2018-2021 period was dynamic economically and for tax policy. Federal policymakers used the tax code to deliver COVID-19 aid to households. For example, the one-year expansion of the federal Child Tax Credit resulted in $322.3 million paid to households during 2021 in monthly installments, helping reduce the number of New Hampshire children experiencing after-tax poverty by half.

Total AGI also grew substantially between 2020 and 2021, rising about 20.2% in total. Wage and salary income increased by 10.5%, while capital gains rose 94.1%. The number of filers reporting more than $1 million in income rose by 51.3%, and income for this group rose 92%, comprising 61.6% of the total increase in income.

While some Granite Staters saw a sharp rise in income, increases were not evenly distributed. Between 2020 and 2021, the average income for filers with AGIs between $25,000 and $75,000 rose about $540 (1.2%), while the average increase was about $885,910 (26.9%) for filers with more than $1 million AGI. Granite Staters with incomes supported by capital gains, who were likely to have higher incomes, experienced much more growth in their earnings than those more reliant on employment income.

Phil Sletten is research director for the NH Fiscal Policy Institute. The NHFPI Policy Memo is a partnership of the NH Fiscal Policy Institute and NH Business Review.