NORMA LOVE

CONCORD, N.H. (AP) ¿ House Democrats fended off Republican efforts Thursday to kill capital gains, estate and other taxes needed to pay for an $11.5 billion budget already on its way to the Senate.

The House voted 182-165 largely along party lines to increase existing taxes on dining out, renting hotel rooms, cigarettes and new taxes on gambling winnings, a 5 percent tax on capital gains above $5,000 and an 8 percent tax on estates larger than $2 million. The House also approved freezing an insurance tax scheduled to decrease.

The package also includes a 15-cent increase in the state's 19.6-cent gas tax, spreading the hike over three years on gas and over nine years on diesel, which Republicans did not oppose.

Republicans took special aim at the proposed capital gains tax, arguing it would destroy New Hampshire's attraction to businesses and wealthy individuals as a state without a personal income tax.

"We will have irrevocably committed this state to the course of an income tax," Hooksett Republican David Hess said.

But Manchester Democrat Robert Walsh defended the tax as only affecting those who can afford to pay it.

The House voted 185-175 to reject GOP attempts to kill the tax.

On Wednesday, Democrats defeated Republicans' proposals to make an average 13.5 percent across-the-board spending cut ¿ $324 million over two years ¿ for most agencies and targeted cuts to other departments. Republicans argued the state should cut staff and services rather than raise taxes.

The House instead passed a budget Wednesday and sent it to the Senate ahead of the 197-section bill approved Thursday that traditionally accompanies the budget and implements tax increases and other changes.

The budget includes $3.1 billion in spending from general tax sources over two years, or about 3 percent more than the current budget. The taxes approved Thursday raise $203 million toward the spending. Additionally, the gas tax raises $125 million to maintain state and local roads and bridges.

"We have faced the devil that is out there, we have faced it head-on and in most responsible, painful way, made difficult cuts and difficult revenue decisions," House Finance Chairwoman Marjorie Smith said Thursday before the final vote on the package.

Under the House budget plan, the cigarette tax would rise 35 cents per pack to $1.68. New Hampshire's tax rate would still be the lowest in New England.

The plan raises the tax on eating in restaurants and renting hotel rooms from 8 percent to 8.75 percent, or 60 cents on an $80 hotel room. It also imposes a new 10 percent tax on gambling winnings above $600.

The 5 percent capital gains tax is modeled after the federal statute and exempts $500,000 of home sale for a couple. The 8 percent inheritance tax exempts the first $2 million and exempts spouses.

In 2003, New Hampshire repealed an 18 percent tax assessed on every penny of any inheritance left to all but children, grandchildren, stepchildren and spouses.

Republicans reminded Democrats their party had supported the repeal.

"The happiest mourners at a funeral should not be the state of New Hampshire," said Salem Republican David Bettencourt.

But Ways and Means Chairwoman Susan Almy said the old tax was flawed because it taxed the first dollar.

"This tax is firmly in the New Hampshire tradition and it is about time we reinstated it," said Almy, D-Lebanon.

Other provisions include allowing the state's four race tracks the option of simulcasting races or also offering live events, allowing the Liquor Commission to close underperforming stores, raising premiums for families enrolled in the government-subsidized State Children's Health Insurance Program, decreasing the state retirement contribution for municipal workers, charging retirees under age 65 a temporary health premium and authorizing the transfer of a portion of Interstate 95 to the turnpike system.
Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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