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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.

Legacy Comments11

NH's Liberals, Progressives and Democrats are as predictable as the sun rising in the east every morning. At every turn, they (including this paper's Editorial Board) want to enact an earned income tax. Why? Because The Left hasn't figured out how to run government in a manner in which it lives within it's means. Almost no NH taxpayer can give themselves a raise at whim. It's unconscionable that The Left can come topower and decide to enact an income tax merely because it's perceived as expedient to do so. It's actions precisely like this that will ensure that The Left's grip on power in this state will last as long the The Right's previous reign.

You are absolutely correct. It is the same principle as the Newtown shootings. Progressives used that to further their agenda as it was expedient. It is their M.O.

Often wonder what we'd be discussing had this passed years ago...maybe not 80 attempts to amend the state constitution to ration public education dollars, maybe not a lawsuit over how we treat our severely mentally ill, maybe not a lawsuit by our hospitals, maybe not how to fund and finally finish I-93 widening (heck, we could by now be daring to dream about mass trans options!), maybe not the highest secondary education cost for our state's residents and resulting highest student debt load, and maybe not a continued leading spot among states in property taxes. Maybe some state think tank with chutzpah will take up that lookback one day and make a couple of informative discoveries.

NH Voters have not taken this pledge: "As a candidate for public office in 2012, I pledge to you, that if elected to serve the people; I will work tirelessly in New Hampshire to: 1. Cut Taxes 2. Cut Spending 3. Cut the size of Government 4. Support the Right To Work Law 5. Uphold and protect both the New Hampshire and United States Constitution" But NH Voters did defeat the amendment to ban a NH income tax. NH currently has a mixed up mess of income taxes and sales taxes: Interest and Dividends Tax, Gambling Winnings Tax, Business Profits Tax, Business Enterprize Tax, Communications Service Tax, Electricity Consumption Tax, Meals and Rentals Tax, Tobacco Tax, Real Estate Transfer Tax, Timber Tax. Meanwhile a $200,000 house in low per capita income Claremont has a property tax bill of $6874, while a $200,000 house in high per capita income New Castle has a property tax bill of $1278. The pledge seems to work extremely well in towns like New Castle where low income families can't find a low cost rental, but doesn't work at all in towns like Claremont where low income families can find a low cost rental. It's way overdue for our elected officials to "serve the people"...and "work tirelessly in New Hampshire to".. significantly help pay for the education mandated by the State of NH. In doing so the elected officials could abide by their pledge to "cut the size of government", "cut taxes", and "cut spending" through simplification of the mixed up and unfair tax mess by simply taxing all sales and/or all income.

principles of the left are becoming clearer to more Americans.......The left, as distinct from traditional liberals, is not, and has never been, interested in creating wealth. The left is no more interested in creating wealth than Christians are in creating Muslims or Muslims in creating Christians. The left is interested in redistributing wealth, not creating it. The left spends the wealth that private enterprise and entrepreneurial risk-taking individuals create......By Dennis Prager

Nice try, Earthling. However, if one examines Claremont's tax rolls, VERY few homes will be found valued at $200,000. To use your words, it's way overdue for The Left to seek what is nothing more than income redistribution masquerading as a tax code. There is absolutely no reason for those who work hard and save to have their hard-earned money confiscated by the state and handed to those who are unwilling to make the sacrifices necessary to attain financial security.

So you think I was comparing house values and not tax rates? And are you saying that taxpayers in low rent high tax towns like Claremont should be forced to shoulder a disproportionately high share of the tax burden for educating NH kids of low income families that "are unwilling to make the sacrifices necessary to attain financial security"? What about the cost of educating the kids of a disabled parent - Claremont too? What about the kids of a parent who lost his/her job and can't find one - Claremont too? Towns like New Castle should just be a low tax haven for the wealthy?

Lot's of "what abouts". That is called paralysis by analysis. There is no progress in that. As for joblessness, blame Obama.

Claremont bought a sewer vacuum, paved Bond St and fixed auditorium roof during last lawsuit receipts........They only reduced the tax rate a wee bit when the could have given everyone a big tax break.......that is the liberal democrats for mismanagement of the taxpayers funds

Speaking of NH's tradition of exporting as much of the cost of government to non-residents, what about the tradition of multinational corporations - both US based and foreign based - exporting profits earned in this state and this country to subsidiaries in foreign tax havens? There is over a trillion dollars in untaxed corporate profits sitting on the books of these paper corporations. What can NH do about that? The answer is easy and has the approval of the US Supreme Court (1994 Barclays Bank decision). It is called worldwide combined reporting and NH had it from 1981-1986 until UK PM Thatcher pressured Reagan who pressured Sununu to restrict combined reporting to the water's edge which excludes all the foreign tax haven subsidiaries from the NH tax base. Want revenues? Repeal water's edge and re-adopt worldwide combined reporting.

Seems like a fair plan. The obvious catch is that the state still has to keep control over the education budget - if the revenue is larger than the budget then there could be a cut in the 3.3% number. Some will say the 3.3% number will always go up - regardless of where the dollars come from the politicians and school boards are actual people deciding to spend more. Blame the people not the schools.

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