Are New Hampshire Taxpayers Being Sold A Bill Of Goods?

There's no doubt that the broad-based taxers in the Legislature are trying once again to saddle the residents of New Hampshire with an odious and regressive income tax, all in the name of “fairness”. There is no such thing.

The reasoning behind such a move sounds reasonable, until you look at the fine print as well as the history of every state in the union that has claimed the same motivation for introducing such a tax.

Much has been said and written about the tough fiscal times facing New Hampshire state government.

Many observers agree that budget cuts alone cannot solve the large and growing deficits. Revenues will lag behind currently approved expenditures this fiscal year by another $100 million, and there are credible predictions of a $500 million deficit, given current service levels provided by the state, for the biennium beginning July 1, 2009.

The current economic crisis amplifies the structural deficit in our state's tax system that thoughtful analyses, such as several papers published by the New Hampshire Center for Public Policy Studies, have identified for many years.

As pressure grows to bring the state budget into constitutionally-mandated balance, there is only one significant way to maintain service levels, and that is to cost shift state obligations to the counties and local communities. When that happens, there is no choice but to raise county and local property taxes, which are already reaching confiscatory levels in most areas of the state.

Sounds like they have everything figured out, doesn't it. But the cause of the problem stated above is not a shortfall in revenue. It is a budget that overspends, outlaying more money than the state has available.

Of course the taxers' first response is to do something about the revenue problem, mainly jiggering with the tax code to wring more money out of the taxpayers, rather than taking a hard look at state expenditures. Oh, they couch it in terms of 'bringing tax relief to beleaguered property owners', but it is a lie. What's worse, it's a lie they believe. Here's one of the things they're proposing:

A statewide education property tax is set at $5.50 per thousand dollars of equalized valuation, with a homestead exemption of $200,000 provided for every principal place of residence. In other words, there is no tax on the first $200,000 of tax valuation.

A flat 5% education income tax is levied on New Hampshire taxable income, with exemptions of $15,000 for the taxpayer, taxpayer's spouse, and $10,000 for each dependent of the taxpayer. There is also a credit for the entire amount of the statewide property tax paid on the primary residence of the taxpayer. A renter's credit is also provided.

Proceeds of the statewide education property tax and the education income tax are dedicated to funding the state's obligation to public education.

Sounds great, doesn't it? But the revenues collected won't be spent for property tax relief. Instead, at some point the Legislature will look at those revenues and decide there's better uses for the money. Property taxes will not go down. Expenditures will go up. And the tax burden on the people of New Hampshire will be much higher with nothing to show for it. Also, the 'education' money doled out by the state will have so many strings tied to it that local control of our schools will disappear.

How is it I can say this? It's quite simple: history.

Every state that has tried this has ended up with no property tax relief, little additional funds for education, more state employees, and less capable schools. Every state. One of the most recent examples of this is New Jersey.

The income tax was being sold under the same banner as the taxers of New Hampshire are doing: property tax relief and more money for education. What they ended up with was higher property taxes, an income tax, not as much money for schools as was promised, more state control of the schools, and a lot more state jobs (most of the jobs created in New Jersey in the years since the income tax was imposed were state government jobs, not private sector jobs). Do we really want to do that here? (Yes, I know there are quite a few hoping for just that. After all it gives them more control over our lives and our money.)

It is time for the state to live within its means. The Legislature must roll back the 17.5% budget increase of the current biennial budget (which added ~$425 million in state spending with nowhere near the revenue to pay for it). Governor Lynch has already stated layoffs of state employees are 'unavoidable', meaning he's looking to cut more state spending. He's also vowed to veto any broadbased tax proposal that lands on his desk. (We'll see, assuming such a bill ever makes it off the legislative floor.)