NH News
6:49 pm
Tue June 5, 2012

Lawmakers Like Tax Amendments; Uphill Climb with Voters

While most of the public’s attention is focused on the education funding amendment, two tax proposals are also up for consideration.

One would ban an income tax, the other would make it much harder to raise new or existing taxes and fees.

If there is any sign of Republican domination of the Legislature, it’s that these two amendments are – basically - flying under the radar.  

GOP leaders like Senator Jeb Bradley are thrilled that after years of talk, they believe voters will finally have a chance to weigh in on the income tax question.  

Bradley: “People have spoken out loud and clear for a long, long time that they don’t want an income tax. And I think that if we put that protection of no income tax in the Constitution there will be certainty and people will feel better about being in business, being entrepreneurial in New Hampshire. And that’s what we want. We’ll continue to have the New Hampshire advantage, it’ll just be enhanced.”

Dan Gorenstein (DG): Of the two, statehouse types believe the ban on the income tax is a sure thing for November’s ballot, guaranteed to sail through the Legislature with the 3/5ths support it needs.

But that doesn’t mean Democrats like Representative Susan Almy won’t do their best to block it.

Almy, the ranking member on the House Ways and Means Committee, says the amendment is way more broad – and more destructive to the state’s tax system – than meets the eye.

Almy: “About 2/3rds of our revenue stream is taxes or fees or assessments on the natural person. Gasoline taxes are taxes on our income. Tobacco taxes are taxes on our income. It is impossible to write an income tax ban without banning all taxes on human beings.”

DG: At this point, there are lots of unanswered questions about the impact a tax ban would have on New Hampshire’s economy.

And whether or not eliminating the income tax would put tremendous pressure on elected leaders to increase property and business taxes over time.

But Charlie Arlinghaus with the conservative Josiah Bartlett Center doesn’t buy that.

He says it’s not like the income tax is a realistic option in the proverbial tool belt of any serious elected leader.

Arlinghaus: “No one in New Hampshire today thinks that there is any real chance there’s going to be an income tax in the next 20 years. It’s just not going to happen. You are taking something off the table that’s not really on the table.”

DG: Arlinghaus thinks the real action – the opportunity to shake up business as usual in Concord – is with the tax cap amendment.

That would require a supermajority – 60% in the House and Senate - to pass any increase to new or current taxes and fees.

Arlinghaus says what he likes about the tax cap is that it will make it difficult to in essence take money away from taxpayers.

Arlinghaus: “There’s all this pressure in the Legislature for spending programs. Once you get elected, after the election, everybody comes to you with a little good idea. and it’s a little good idea here, and a little good idea there. And you have hundreds of proposals to spend a little bit more money. And it creates pressure, if only we would raise this tax. And there is no counterbalancing pressure to keep taxes at the level they are at. What a cap would do is create that pressure.”

DG: 7 other states have similar constitutional amendments around the country, including in Arizona, Nevada and California.

Jeff McLynch, with the left-leaning New Hampshire Fiscal Policy Institute, says all you have to do is look at some of those states to understand what it looks like when a state handcuffs itself.

McLynch: “The most notable is Arizona which had to sell off its Supreme Court and its statehouse and is now renting those back. That generated revenue to fill a budget hole in the short run but in the long run that’s going to mean real costs for Arizona.”

DG: Or McLynch says you can look at California, where several years ago officials had to issue IOUs to people who did people with the state and residents who received tax refunds.

McLynch says based on other experiences, a tax cap in New Hampshire would lead to more budgetary gimmicks and one-time fiscal fixes.

If there weren’t any tricks, Steve Norton with the New Hampshire Center for Public Policy Studies says the cap would mean constantly cutting state government.

Norton: “Demand for state services grows at about 3.7% over the last 20-25 years. And our revenues grew at 2.3%. In that world, a cap like this would require very extensive conversations about a 1-1.5% budget reduction each year.”

DG: Norton says budgetary decisions in these so-called Recession years have given the public a peek at what life in New Hampshire would look like if the cap passed.

It takes a 2/3rds of the voters to change the Constitution.

And while both these amendments are likely to pass the Legislature, they’re both considered long shots to get enough support from the public.