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Editorial: If not an income tax, then what?

The constitutional amendment considered by New Hampshire voters this month wasn’t precisely a referendum on a personal income tax, but it was pretty close. And the vote was clear: 57 percent of voters favored a permanent ban on such a tax. The only reason they didn’t carry the day is that constitutional amendments require an even greater majority than that.

It’s not like there was much risk of taxpayers waking up to a New Hampshire income tax anytime soon. Advocates – including the Monitor – have been making the case for such a reform for generations, without success. Save for a brief, dramatic moment in 1999 when state legislators actually approved an income tax (did that really happen?), most politicians – even those who favor such a tax privately – have been reluctant to get anywhere near it.

But for newly elected politicians – Gov.-elect Maggie Hassan and the 424 members of the Legislature – a basic question, largely avoided in the recent campaign, remains: How and when will New Hampshire solve the inherent unfairness in its tax system?

Without a broad, statewide income tax, New Hampshire relies to an extraordinary degree on local property taxes to finance the basics of government: good schools, police and fire protection, paving and plowing the roads, prosecuting criminals and locking them up, caring for elderly residents in decent nursing homes. Fans of such a system have long touted the “local control” it gives to voters at town meeting each March. But as the state shifts more and more responsibilities to cities and towns, school districts and counties, the amount of “control” that local voters can actually exercise grows smaller.

Relying so heavily on property taxes means that schools in property-rich communities are often significantly better-funded than those in property-poor communities. This was the heart of the long-ago Clare-mont litigation, a case won by poor communities. Legislators and governors have spent 15 years wrestling with how to carry out (or not) the court’s decree, but vast differences in resources remain. In New Hampshire, geography still plays a large role in determining what sort of education children receive.

And relying so heavily on property taxes means that people with high incomes pay a smaller percentage of their money in taxes than those with modest salaries. This long-standing state of affairs has made New Hampshire attractive to the wealthy, at the expense of their neighbors.

According to statistics from Mark Fernald, an income tax advocate and former gubernatorial candidate, households with the highest incomes in the state – $480,000 and higher – pay just over 2 percent of their incomes in state and local taxes. Middle-income households pay about 6 percent. Those at the bottom pay 8 percent. It may feel like this is the way it’s always been – but that’s not precisely true. The authors of New Hampshire’s Constitution, after all, envisioned a tax system based on income.

The issue of how much wealth individuals should contribute to the public good was an enormous issue in the presidential campaign; a similar debate could surely be held here at home.

Hassan took the state’s tired old pledge against an income tax, and there’s certainly no indication that there will be a groundswell of support for one now, especially given the voters’ declaration at the polls this month.

But that doesn’t absolve state lawmakers of their responsibility to treat all state residents fairly and to make sure children across the state have access to good schools. If they won’t use an income tax to do it, what will they use?

The issue of fairness is one based on emotion not on economics for all the common good. Mark Fernald lost his run for Gov. because he was for an income tax. The latest stats from the IRS are from 2009. yes another Gov Dept that cannot manage to put out a report. The wealthiest 400 Americans earned 81 billion and paid 16.1 Billion in taxes in 2009. kept in mind I am talking 400 Americans. That is a rate of 20%. The bottom 50% in 2009 earned 1.5 Trillion and paid 19.5 billion in taxes. That is a rate of 2%. 400 Americans paid a higher tax rate than 69 million Americans. So is that fair?

I thought we were talking about NH taxation - As my below example showed a retired person on a $50K fixed income with my $7K tax bill comes out to 14% of their total income before Federal taxes. Now granted that's not 20% but that retired person example doesn't have Tens of MILLIONS left over after paying the tax...........As far as Federal taxes, I guess you’re like Mitt that feels the average American should not be allowed to take the "exact" same deductions that he is so proud to take. The average person takes the deductions and they owe a small amount and you’re upset, he takes the deductions and are upset that he still has to pay because he makes more.

Sorry Jim, but a fair discussion about Current Use seems to be in order here. I suggest you go to the SPACE website and the forestry Website for starters. 68% of the current use land is owned by folks who live in NH. The state owns some and some out of staters. Check Space to see the numbers. Those numbers do not support your Land Baron take. Most of the folks who own land are low income or middle income. Forest Industry in NH accounts for 8,160 jobs. With a 1.5 Billion revenue Tourism brings in 1 billion with 11,400 jobs. Timber tax alone pays 3 million a year to communities. We get 7 million alone from Christmas Trees Maple Syrup brings in 4 million. I have not even mentioned farms. These lots employ and bring in revenue to NH. It is not a free ride. I have not even mentioned wood pellets or other factors. A debate is great, but get the facts.

I cannot agree that this privately owned land deserves this special tax break. If it is a business then every business gets deductions and all should get the same. As far as your low & mid income statement, not sure how that applies unless you are saying that IF NH had an income tax you would exempt all earnings OVER a certain amount because it would cost the payer too much. That's in essence what current use does, large amount of land in a property tax state and you don't want to pay tax on it then put it in current use and you can still use it for a business or your enjoyment. I might feel different if ALL land in current use was posted for "public use" but even your Space site says that no landowner has to make their property "open". NO matter how you cut it over 50% of the property in NH is not fully counted for taxation in a property taxed state and it is not the “basic needs to live” side.

As a person with land on current use, I can tell you that current use has many benefits for sportsmen and recreation enthusiasts alike. It also saves open space and stops this state from becoming a suburb of Boston as it started to be over the past 30 years. People with just a few acres in land use have to pay to ever develop that land and most people like to hold the land for their recreation. Much of that land could be ledge or unable to be effectively developed. We are in a dire economy and many people do not have the money to keep their land which may have been in their families for generations. Many small farmers would suffer if land use was discontinued. 90% of land use land is open to the public and to clarify, if you get hurt on anyone's land the landowner is not responsible if they open their land. The better question is that if land use ended, only the wealthy would own land, they would gobble it up and a few people would hold all of the cards. Moreover, if we collected more revenue, which is what your argument boils down to, how would it be spent. We already know that if Obama gets his way and taxes the rich, he will collect only $90B per year while spending $1T. The same would happen here. People would lose their land and the rich would own it all and government would continue to overspend. Americans and New Hampshire folks need to wake and and realize when you have a person with a gambling problem (government) you don't find more ways for them to get money to gamble, you cut them off (cut the revenue source) and get them into therapy (fiscal responsibility).

Actually I’m not for the spending more money part, I would rather see the income revenue stay the same but adjust the tax rate down for those that only own a house lot. It’s a property tax state, if you want to own a lot of property then you should be paying the full share, not less. “People with just a few acres in land use have to pay to ever develop that land”” – yes they do, after the land has grown in value for say 20 years they pay a onetime 10% tax. They can sell one acre and put the rest back into current use (if they still have the 10 acre min) or sell it all to anyone they want. I know more than one person that use this as part of their long term retirement plan. Their plan is to sell it to a developer when time to retire and then move – so much for that conservation part……. I’ve stated before that I am for an income tax – lower the property tax to about 20% of revenue and the 80% comes from income tax. Again start out with the same revenue point we are at. As a person’s income goes up in life they pay a little more and when it goes down they pay a little less. Property tax is low so nobody is forced to sell their land to the hated developer and they can retire in their home vs. selling it due to the high property tax. The spending problem is up to the people in the state to control “regardless” of where the money comes from.

Great letter IAR. Another aspect of current use that should not be overlooked is the timber industry in NH. And the fact that open and forested spaces need less local services than developed areas like fire, schools, police etc.

Repeal the "Current Use" property tax exemption that has 51% of the property in NH not paying taxes on the actual value and watch how many people will be in favor of an income tax. HALF the property not being assessed at the current market value in a state that derives its revenue from property tax. A percentage of income, I look at it this way: a family makes $130K/yr and pays $7K in property tax - that’s 5.4% of income; the same family retires to a $50K/yr fixed retirement income and the property tax is still $7K - that’s 14%. The longer a person lives on a fixed income (retirement) in NH the higher the percentage of that income is paid every year. No one refuses a $2K pay raise because they would have to pay $100 or 5% more in taxes but not everyone can afford to pay the same $100 when their income does not go up to offset a dime of it year after year. In most cases a person gets a tax exemptions for “basic” living needs, in NH it is the opposite – you don’t get the exemption for basic needs you get the exemption for having the most property. Just think what the real tax rate would be if 51% percent of the property in NH was put back into the system.

Interesting...question though...how much of that 51% of property is completely un-buildable ( swamp, steep incline, ledge, no road access) and how do you assess said property? Example..If I own 20 acres and only 2 acres actually meets town requirements to build, then should the other 18 be assessed at a different rate???

Very simple - if you were to sell your 20 acres, be it a swamp or rock ledge then it has a value and your taxes should be based on that current selling value. Are you saying the land has zero value? Why would you have paid money for the land when you bought it if it has zero value? Every piece of land in "current use" has a value, some much higher and some much lower. Kind of like the old "view tax", some people think a mountain view is great while others think a view of the town from the top floor of a high rise building is the best view - the value for either is simply what it could be sold for and thus the value of the property.

"If they won’t use an income tax to do it, what will they use?" Suggestion....you are a "newspaper". Go interview Maggie and the new speaker Terri and ask them what their plan is. You now have access to the speaker, which you complained about not having for months. Use it.

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