November 08, 2024
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Shipyard border settled, but N.H. tax issue lives

PORTLAND – The highest court in the land says the Portsmouth Naval Shipyard is in Kittery, but that won’t stop efforts to prohibit Maine from taxing shipyard workers from New Hampshire.

Legislation introduced by Sen. Bob Smith, R-N.H., would prohibit states from taxing nonresidents unless the states have reciprocal agreements allowing the practice. New Hampshire has no personal income tax.

“I certainly am going to continue to support New Hampshire residents who work in Maine who have to pay that Maine tax,” Smith said Wednesday. “We’re going to try to repeal the commuter tax if we can. That’s the one avenue we’re going to continue with.”

Maine’s income tax law is especially galling for married shipyard workers from New Hampshire. The incomes of their spouses also are taxed by Maine, even if the spouse does not work there, because Maine’s graduated income tax is based on family income, not individual income.

Efforts to keep New Hampshire workers from paying the Maine tax suffered a blow Tuesday when the U.S. Supreme Court unanimously brushed aside New Hampshire’s claim to the Portsmouth Naval Shipyard. The court ruled that Seavey Island, on which the shipyard is located, falls within Maine’s borders, not New Hampshire’s.

The 297-acre island is in the Piscataqua River, which separates the two states. The court ruled with Maine in saying the border falls in the middle of the river, not along the Maine shoreline as New Hampshire argued.

At issue was millions of dollars in income tax revenue that Maine collects from roughly 1,300 New Hampshire residents who work at the yard, which refuels, repairs and refurbishes nuclear submarines.

New Hampshire Attorney General Phil McLaughlin said the future of the tax issue could lie in the legislation put forward by Smith, who has made previous unsuccessful attempts to stop Maine from taxing New Hampshire residents.

An earlier attempt by Smith to introduce a commuter tax measure failed. Also unsuccessful was a measure by Smith and Sen. Judd Gregg, R-N.H., that would have prohibited the federal government from withholding taxes from citizens who work at federal government facilities located on the border of two states; those workers would have paid taxes only to the state in which they lived.

Gregg said Wednesday legislation to address the issue probably would have to be targeted specifically at Maine and New Hampshire.

“The capacity to legislate is probably limited, but I think it is something we should look at anyway,” Gregg said. “The obvious problem with passing that legislation is the Maine senators would oppose it and they’re in a position to stop it.”

While New Hampshire lawmakers considered their next move Wednesday, Maine officials were optimistic the tax issue has been resolved.

“There is no what’s next. From Maine’s perspective, things are status quo – if only a little more clearly defined,” said John Ripley, Gov. Angus King’s spokesman.

“The Senate has considered and rejected repeatedly legislation introduced by Senator Smith,” said Dave Lackey, a spokesman for Sen. Olympia Snowe.

Lackey said it was important for the congressional delegation of both states to concentrate on the future of the yard, which he called the “Kittery-Portsmouth Naval Shipyard,” instead of “bickering about an issue that has been set by state and federal courts and has been affirmed by the highest court in the land.”

The shipyard survived three rounds of base closure cuts in the late 1980s and early 1990s. Executive action kept the shipyard off the list in the first round. It took the full weight of the Maine and the New Hampshire delegations to keep it off later lists.


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