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Saturday, December 1, 2012

If not an income tax for NH, then what?

Guest Editorial

The constitutional amendment considered by New Hampshire voters last 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. ...

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The constitutional amendment considered by New Hampshire voters last 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 Concord 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?

– Concord Monitor