Editorial: On state budget, an old plan might be best
Every two years, New Hampshire’s governor and lawmakers perform a version of an act perfected by the late, great magician Harry Houdini, the one where he’s handcuffed, clapped in leg irons, packed into a box weighted down with lead and nailed shut, the box bound with rope and dropped overboard. The box is the state budget and the constitutional requirement that it be balanced. The other impediments to escape: the restrictions lawmakers place upon themselves with The Pledge and a general antipathy to raising revenue.
Houdini always escaped, and so too, over the years, has New Hampshire. For years, the state balanced its budget by pulling hundreds of millions of dollars through a loophole in federal Medicaid rules. Federal stimulus grants got the state through the recession. But in the last legislative session the reluctance to raise revenue led to huge cuts in funding for higher education, a $250 million raid on money due the state’s hospitals, and widespread reductions in state spending.
Next month, Gov. Maggie Hassan will present her budget. It will take more than a magic act to get its revenue figures to meet goals like restoring funding for the university system, let alone the state’s basic responsibilities. At the moment, the state faces a $25 million deficit for the current fiscal year. Anything could happen in Washington, but for now it appears that the state will lose some $32 million in federal money. Unless reversed, tax changes made by the last Legislature will mean $60 million less revenue in fiscal years 2014 and 2015. For a little added excitement, the outcome of lawsuits over the failing mental health system, inadequate conditions at the women’s prison, and the confiscation of money meant for hospitals could blow a hole in whatever budget is crafted.
Hassan has pledged to veto a sales or income tax, so those new revenue sources are off the table. The question is, should they be? What appears to be in store is a downshifting of federal responsibilities to the states and a continued downshifting by New Hampshire to local and county government. That means higher property taxes. In the face of that, pledges taken by candidates shouldn’t silence discussion about New Hampshire’s tax system and the disproportional burden it places on those least able to pay and its inability to fulfill the state’s responsibilities.
To keep that discussion going, we encourage renewed talk about the best change to the state’s tax system ever proposed, the Hager-Below plan named for former Concord mayor and state representative Liz Hager and former state senator Clifton Below. The plan made history in 1999 when, despite the Pledge, it passed both houses of the Legislature, only to die in the face of a veto threat by then-Gov. Jeanne Shaheen.
In short, the plan called for a 3.3 percent tax on income above a base level of $22,000 per couple, after a deduction of $3,000 for every dependent. Revenue from that tax was entirely devoted to funding public education. The tax was coupled with a $250,000 property tax exemption on primary residences, along with an added income tax break income tax break for renters. In keeping with the New Hampshire tradition of exporting as much of the cost of government to non-residents, the plan shifted much of the tax burden to the owners of second homes, many of whom are non-residents. At the same time, it dramatically reduced the property tax bill of residents while making the state’s tax system less regressive.
We encourage lawmakers who want to break out of the biennial budget box, to craft some version of the Hager-Below plan and put it up for discussion.