Editorial

Keep talking about state's tax structure

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Oh, if only Hooksett Rep. David Hess was right and the Democrats were "laying the groundwork for an income tax." Sadly, most New Hampshire Democrats in leadership positions, even those who have long supported an income tax, were quickly cowed by Gov. John Lynch's repeated veto threats. Though they may cross their fingers behind their backs when they do so, they have largely obeyed the Republican pledge not to support a new broad-base tax. Their predecessors in 1999, when the House and Senate each passed a different form a bill creating an income tax despite then-Gov. Jeanne Shaheen's veto threat, showed more courage.

Yesterday, lawmakers attended the second day of a two-day summit held by the House Ways and Means Committee to hear testimony about New Hampshire's tax structure. Because the committee's chairwoman, Democratic Rep. Susan Almy of Lebanon, has voiced support for an income tax in the past, some Republicans, including Hess, saw the event as part of a conspiracy to kill the so-called New Hampshire advantage that comes with not having a general sales or income tax.

The committee was careful to ensure that the representatives of both sides of the issue had a chance to air their views. That didn't quiet critics who treat the state's unfair tax structure like previous generations treated suicide, cancer and divorce, something that should not to be discussed in public. But silence allows ignorance to prevail and problems to worsen. Putting all the options as all parties see them on the table, as the committee did, is a wise approach.

Every tax hurts some people more than others, but the cost of paying for government should be shared as fairly as possible.

Arguments about which services are necessary and which aren't, and which level of spending is appropriate, are inevitable and good. But no matter what spending level the most representative legislative body on Earth deems appropriate, the question of how to raise that money must be answered. Economies, demographics and societies change. Tax structures must change with them or inflict undue pain on some while largely sparing others. That's been the case with New Hampshire's tax structure for a long time.

A sales tax would have to be extraordinarily high to raise enough money to fund government, since the state already taxes many commodities and would almost certainly exempt essentials like food, clothing and medicine. That leaves an income tax.

As many at the summit pointed out, unlike an income tax, which is based on ability to pay, the tax on a property owner does not fall when income shrinks or vanishes. More than half the state's residents pay more than 5 percent of their income in property taxes. Some, including retired homeowners and the lower middleclass pay much more. Others, including wealthy people with modest homes or families with two top-tier incomes, pay relatively little.

The lack of a tax structure capable of consistently raising adequate revenue also means - as the state is seeing now - that the mentally ill and others who depend on state services suffer more. It means that tuition charged by the University of New Hampshire is the second highest of any public university in the nation. It means that investments that could save big money - programs to cut prison recidivism rates, for example - aren't made.

Does the advantage that New Hampshire gains by not having an income tax make up for the unfairness of the system and the suffering of those who can't afford to pay the heavy cost of the state's unique reliance on property taxes to fund government? That's a question New Hampshire citizens and lawmakers must ask, not just at a two-day summit, but over and over again.

Our answer is no.

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The Myth of Local Control

Insulting someone does not constitute a good argument. People sling rocks and sticks when they cannot figure out what to say.

Even in terms of our schools, local control is long gone from reality. The state constitution explicitly places the responsibility on the state government. The state controls decisions on funding, incorporation of school districts, and many matters of curriculum, policy and regulation. The federal government dictates terms on legality of policies, funding for special education (then the state puts in what it wants leaving the rest to be paid by the taxpayers in the school district), etc.

As someone said during the two-day tax forum, New Hampshire is not just town- and city-states. Our state of New Hampshire is a shared identity because of the land and people and our social customs and history. For example, we hold the first-in-the-nation presidential primary. In economic terms, each state has a "brand" but in cultural terms, I like to think we have a special character that comes from living here (some for generations). Part of that character has been lived due to the Old Man in the Mountains and what it represented (and represents still) to us spiritually.

But towns and cities and counties by law must follow the decisions made by the legislative, executive and judicial branches of state government. Property taxes and fees and fines and government disbursements from state and federal governments are the means by which local and county governments fund their budgets.

Change can be a difficult process but without change (for the better) our New Hampshire will fall behind (as it has started doing). Unless we do something about our tax system and people losing their homes to unpayable property taxes, New Hampshire will lose its special quality of living. The New Hampshire Advantage is so much more than just not having a sales and an income tax.

jseaver's picture

Mind answering the question, jseaver?

Or are you too busy telling us how open your mind is?
- C. dog

C. dog e. doGy's picture

It would be the death of New Hampshire as we know it

This goes beyond simply getting upset over an additional burden being placed on the backs of New Hampshire taxpayers in order to cover up the Democrats

Bruce in Brentwood's picture

Ignorance Is Bliss

Those of you who follow the lead of Rep. David Hess and shoot from the hip without knowing the facts and figures and people you attack - not knowing the full story is political bliss isn't it?

The real life problems with state budgeting in the past has come from spending according to what money comes in. That means the state downshifts its responsibilities to towns, cities and counties and short-changes programs that we, the people of New Hampshire, need. (And that means higher and higher property taxes and local fighting about spending.)

Instead of investing in economic development that would expand the state economy, our state leaders have mostly cut wherever they could - just as you Republicans wanted. Where does it lead? Pain and suffering for those people most in need of state services AND layoffs of state workers helping to provide those services AND increases in taxes and fees that hurt the people with low incomes the most. Not funding programs that help people survive is NOT JUST IRRESPONSIBLE, IT IS CRIMINAL. (Just like not having universal health care - which kills about 45,000 individuals in this nation every year!)

Those advocating telling people to shut up and move out - if you have been living in the same house for generations would you want to be forced to shut up and sell your house and move to some other state? Why be so mean-spirited and uncivil and lacking in our common values?

The second most important idea that came out of the forum sponsored by the House Ways and Means Committee is that tax system reform should be revenue neutral. That means any enacted state income tax would not increase the tax burden but would just shift the tax burden to just and equitable levels for both business and indivduals. Because of the diminishing state advantage and competitiveness (as stated by the economists) due in part to the high and growing corporate tax burden, we need to do something to create more opportunities for business startups and thus create more and better paying jobs.

We now have 55,000 unemployed and half again that many underemployed, and we are now losing our 30-44 population largely responsible for our workplace productivity (they in fact are shutting up and moving out-of-state). We have lost our competitive advantage in innovation and high technology jobs. We are frankly losing our New Hampshire advantage by not doing anything about our bad tax system. The highest property taxes in the land will not attract more companies to come to New Hampshire.

For those who would rather die than work toward a better common future, please hear this.

We are not Connecticut. Our state leaders are not irresponsible and will not spend us into the dire straits now suffered by Connecticut and California. We need a flat 4 percent income tax (only a flat tax would be constitutional), dedicated by a constitutional amendment to fund only public eduaction, enacted with provisions to eliminate state property taxes, the Business Enterprise Tax, and some portion of the local and county property tax burden. That means the state government would finally accept the full responsibility for funding public education and end for all time the inequities in our public schools. It might even do something about the highest tuition rates for our university system.

My advice - stop complaining and attacking other people AND START working on the solutions we need to become a better state to live in for everyone of us. We must depend on Republicans to come up with alternative ideas needed for the public debate to succeed.

jseaver's picture

Why not the full Monty?

jseaver -
I commend your start at a concrete restructure, but why only go half way? There's actually much more cost savings available by killing the property tax scheme all together: no appraisers, bureau mice flitting about recording and filing real estate transactions, etc. to execute the property tax scheme. Think of the savings!

Me thinks I might smell a rat here. Prove me wrong.
- C. dog hates naked-tailed vermin

C. dog e. doGy's picture

Take a good look around

We keep saying this state has "The New Hampshire Advantage" and that is "no
sales tax or income tax". Of course we are the worst state of all 50 states
for corporate taxes but no one appears to notice that but rather says
"companies will move here because there is no sales tax or income tax". Several reports have come out about the state losing it's young people and college grads choosing not to stay in this state. The proposals are to create zero size lots and "affordable" housing and that will keep them here. In a study about 8 months ago there was a survey of College students as to
the cities they most wanted to live in for the entire US. Out of the top 20
the closest to here was Boston and Worcester Mass. They choose the locations because of accessibility to transportation and good paying diverse job offerings beyond working at a shopping mall. Now a new study has just
been published in Business week for the top 40 Cities / metro areas in the
US to live and work in.
http://images.businessweek.com/ss/09/10/1022_40_strongest_us_metro_econo...

As I did the slide show to see what they showed I was struck by two
facts. One is not a single location in New Hampshire showed up and also
outside of Texas all the other states have both a sales and income tax but
businesses flocked to there due to the "Low cost of doing business there".
Now years ago my company tried to get me to transfer to the Dallas Ft Worth
area but I hate hot weather. Even though the state of Texas has a sales tax but does not have a income tax they do have multiple local
jurisdiction taxes that have you pay for everything. They don't tax a companies inventory until it is sold unlike this state that made all the smoke shops pay taxes on all of their inventory after they had already purchased the product because this state wanted the "new taxes" they had just raised on tobacco products.

Another item to note is because I follow information on transit systems
around the US virtually all of the cities mentioned in the report have on
line right now both heavy and light rail transportation or they are
currently building it because it helps to concentrate core services around
those areas. I gather none of them have heard about the New Hampshire
advantage.

By the way I often wonder why "The New Hampshire Advantage" with no sales or income tax did not draw the "Mall of America" to be built here. Instead the biggest shopping mall in the lower 48 , There is one in Canada that is bigger , was built in a state that has both a sales and income tax. I spent 22 years living in Northern Virginia that had the two fastest growing counties in the US for 12 years. It has millions of square feet of office space and shopping malls and still draws in companies that relocate to there but they have a sales and income tax.

cavman35's picture

Democrats and booze!

I had a friend who once said...give me just..one..more drink..and I'll quit..I promise!

Democrats just want...one more tax..just one more and then they'll be happy!

Stop spending!

cleverdave's picture

The best argument against an income tax

Is the rank irresponsibility of this session's and last session's Democrats.

They knew that they did not have the money to pay for their whims, yet they still spent beyond their means, to the tune of a couple of hundred of million of dollars.

They knew that revenue estimates from 2000 through 2006 were barely holding their own, yet in 2007 decided to increase revenue projections to cover (sort of) their financial mismanagement.

They knew that revenue estimates in 2007 and 2008 were lagging, yet in 2009, they increased those revenue projections yet again, based not on financial data, but on how big a deficit they had created.

With that record, what are the chances that any new revenue sources would go to pay off our deficit rather than just be spent? What are the chances that this bunch will not just budget to what they want and disregard the actual projections of any new source? Who is to say they won't just inflate a new revenue source's potential just to justify their irresponsibility?

Nh may need to look at different revenue sources, but handing this group a blank check, as we have seen, is asking for more and more debt, new revenue sources or no.

wss1's picture

income tax, which is based on ability to pay

wrong...it is based on your ability to earn...

kenstcyr's picture

Even worse, it's based on your...

inability to get the 'type' of income that you earn excluded from the tax. And your ability to get exemptions/credits/offsets for yourself.

MoodySara's picture

sell, move or shut up

if you cant afford your property taxes - SELL- MOVE .....OR SHUT UP

there is no promise in life.......... that everyone will OWN a home - cant afford your taxes - RENT!

sailmaker's picture

Still waiting after all these years.

Every time some editorial or letter suggests that enacting some new tax (income tax in this case) will be used solely/mostly to reduce some other tax (the dreaded property tax), I ask the writer(s) to answer one simple question:

Can you show me a case, from any state, at any time, where this offset of one tax against another has happened?

The silence, as now, has been impressive.

MoodySara's picture

Moody , you are right on :

Moody , you are right on : just talk to anyone down the road in CT where an income tax was initiated back in the mid 80's supposidly to bring property tax relief. Of course this did not happen and CT citizens now have one of the highest tax burdens in the US.

bobolot's picture

Throw the Baby out with the Tax-water!

Hmmm. Now if we follow the stellar logic of the enshrouded Monitor editorial staff, we must change the current inequitable tax scheme on fixed property to another scheme that is eminently more equitable by attaching the Grate State's proboscis to its hosts' income stream.

Surely, given how badly the former damages the plebes, and how well the latter makes all those rich folk "pay their fair share", this same staff must be advocating for the abolishment of this anarchic, unfair property tax in favor of income redistribution. That would be the principled approach, based on the principal they claim to hold dear and near. Yet, I haven't quite heard that yet from their Clarion horn, or the lesser trumpeteers here on the posting boards. Perhaps my hearing is failing me from the deluge of noise from all quarters on this "very serious issue" of which Peter to rob to pay Polly.

I, for one, am all for a change in the Grate State's confiscatory scheme as this will afford those who favor darkly pigmented exchanges freer reign in a state that lived free and died. So please, bring it on, but by all means, get rid of that heinous property tax!

- C. dog waits with baited breath for liberal lapdogs to muster a retort to warn their masters danger is nye upon them

C. dog e. doGy's picture

Read the NH Constitution

If there was an income tax....then it would have to be a flat rate per the NH Constitution.... and then 'progressives' wouldn't like it. For some reason they want to SOAK the rich.

Also if NH did put an income tax in it would only solve the problem for a few years because the government would want more and more money to 'fix' problems.

And property taxes would slowly creep up... just go ask New Jersey about that. They started an income tax to fix high property taxes.

RealNHGOPer's picture

That's okay

Most state income taxes are either flat or close to flat. They are not highly progressive because such a scheme would encourage rich people to move out of state.

As for the fear that an income tax would lead to higher taxes... which system we use to collect funds and how much funds we collect are two totally separate issues. The taxes we pay are a function of how much the government spends-- and nothing else.

Switching to an income tax would allow some of the tax burden to be shifted from poor families to high earning single folks, such as myself.

smhwbldg's picture

WRONG!

A sales or income tax would just be another tax in addition to the property tax. It would hurt those of us who make $25K or less and pay 1/3 of that in property taxes.

Get the full scoop on the tax summit here:

http://www.cnht.org/news/2009/10/22/controversial-tax-summit-raises-conc...

NH's picture

Wrong!

Sorry, I tend to trust economists more than wackos carrying around "Dont tread on me" flags.

smhwbldg's picture

Don't miss this