My Turn: Economic development is more than slogans
This week, Republican candidate for governor Walt Havenstein released his economic development plan for New Hampshire.
Havenstein calls it his “8.15.17” proposal because of his stated goal to create 25,000 additional jobs in the state by Aug. 15, 2017. This is a laudatory goal, but his plan is sadly reminiscent of failed presidential candidate Herman Cain’s “9-9-9” idea (replacing the U.S. tax system with a 9 percent personal income tax rate, 9 percent business transaction tax and 9 percent federal sales tax).
Like Cain’s stump speech, across-the-board tax reduction idea, Havenstein’s proposal is more slogan than reality.
In essence, the heart of Havenstein’s economic development initiative is to reduce the state’s business profits tax from its current level of 8.5 percent to 7.4 percent, claiming the resulting job growth will offset an estimated loss of approximately $50 million or more in biannual budget revenue.
Havenstein’s challenger in the 2014 Republican primary, Andrew Hemingway, has also announced an economic plan centered on the state’s business profits tax. He would eliminate it completely, reduce other taxes, and introduce a “flat tax” on businesses and non-profits of 2 percent on wages, salaries, interest and dividends.
New Hampshire does face economic challenges, and we need to do more to boost economic development. But more ideological, supply-side economics isn’t the solution.
Havenstein and Hemingway would do well to take a look at what’s going on in Kansas, where Gov. Sam Brownback pushed through a business profits tax reduction, promising the resulting job growth would make up the difference for state revenues.
What actually happened was state revenues collapsed by 11 percent, the state’s bond rating was hit and job growth lagged behind the rest of the country. Kansas is now trying to dig its way out of a self-created revenue crisis.
New Hampshire would be wise not to follow suit, and to reject Havenstein and Hemingway’s discredited across-the-board solutions for what they really are: election-season talking points with no basis in economic reality.
Yes, our business profits taxes are higher than they should be and we do face daunting demographic shifts in our economy, resulting in an aging population as well as an unsustainable loss of young workers leaving the state because of a lack of meaningful employment. We also face particular challenges in health and energy costs and workforce housing.
But we do have many advantages, among them unparalleled cultural and natural resources as well as a robust education system that is doing an admirable job responding to the demographic challenges facing New Hampshire.
And we have a history of working together – the private and public sectors, labor and education. Establishing common ground and goals among these key groups takes leadership and hard work, not just sloganeering.
Moving New Hampshire’s economy forward requires thoughtful, long-range strategic thinking, not just election year slogans. The better leadership position would be to offer targeted tax reductions meeting constitutional and legislative muster for identified enterprise zones.
Pettengill Road in Londonderry – an undeveloped 1,000-acre parcel of land adjacent to key transportation networks in southern New Hampshire – is a key example for consideration of this type of concept.
If we want to attract manufacturing to areas such as the North Country – which presents a much different set of economic challenges than does the state’s southern tier – shouldn’t our tax and policy prescriptions be tailored to address particular regional needs?
In short, we cannot and should not approach economic development as one size fits all. In the final analysis, we need leaders who build partnerships between labor, private industry and the public sector so all can come together around common economic development themes and strategies. Leadership takes vision and hard work, not just slogans and bullet points.
(Mark Connolly was the director of securities regulation for the state of New Hampshire from 2002 to 2010 and now owns New Castle Investment Advisors, LLC, a portfolio management firm in Portsmouth.)