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Cutting state taxes this year makes no sense

Last modified: 2/2/2011 12:00:00 AM
Here are some of the big questions that should be on the minds of New Hampshire budget-writers this year:

How will state government keep its promises to cities, towns and school districts?

How will it pay for aid to its neediest residents - the chronically unemployed, the mentally ill, the developmentally disabled?

How will it prop up a court system that has dramatically lowered the bar on the meaning of "swift justice"?

How will it keep the state's parks in good repair? How much does it care about environmental protection?

And now for the biggest question of all: How will lawmakers answer those questions while also dramatically chopping even the inadequate revenue currently available to them?

That last question is preposterous, of course, yet that's exactly what numerous legislative leaders have in mind.

Republicans have proposed a long list of tax cuts that bean-counters estimate would cost more than $200 million over two years. Considering that estimates of the state's budget shortfall are between $600 million and $900 million, that's not peanuts. Even if sponsors quibble with the estimates, there's no denying the larger point: Slashing taxes amid such a revenue shortfall will only make things worse.

Among the suggestions: reducing the rates of the tobacco tax, the business profits tax and the rooms and meals tax. There are proposals to eliminate the gambling tax and to add years to the time a company could carry a net loss for tax purposes. One bill would raise the threshold for paying any business enterprise tax at all. Another would create a nearly full exemption of "reasonable compensation" from business taxes, allowing businesspeople to label nearly any profit as salary and thus avoid taxation - the very situation Republicans were trying to avoid in the 1990s when they created the business enterprise tax in the first place.

Despite GOP rhetoric that makes it sound easy, bringing state spending in line with even existing revenue is a monumental challenge facing a crowd of newbie lawmakers. Cutting taxes may help politicians score easy political points, but it surely makes the job of responsibly governing that much harder.


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