Undisciplined: State government grows

Why does government raise taxes? Because it can.

Rapid growth is the natural state of government. Slowing it takes either extraordinary discipline among elected officials or the forced imposition of discipline via restrictions imposed by charters.

Were it not for the state's constitutional amendment requiring a balanced budget, you could bet the family farm that the state wouldn't have a balanced budget. As the state has no tax or spending cap, spending and taxes grow at rapid rates.

Absent mandatory restrictions on such growth, the only way to curb it is to elect people with the will and discipline to do so. The state had no spending or tax cap when Gov. Craig Benson was in office. And yet he presided over a state budget that kept spending in check and returned more than $80 million in surplus -- all because he had the fortitude to demand spending discipline from legislators.

Since Benson left office, state general fund spending has grown significantly faster than the rate of inflation. The first budget under Lynch raised state general fund spending by 5 percent. The second one raised it by a whopping 17.5 percent, and next year's increase looks to be in the neighborhood of 7 percent.

Families and businesses can't make revenue increase by decree. If new revenue is desired, government just raises taxes or fees. The temptation to do so is powerful.

That's why it is so important for government to be headed by a strong-willed chief executive with the fortitude to cut spending. If New Hampshire had one of those, the people wouldn't be looking at so many tax and fee increases this year. Unfortunately, we don't have one.

Today's News

Tell state to cut spending

For those of you who have been distracted by debates over same-sex marriage, transgender rights and medical marijuana, here is your wake-up call.

Slots revenue part of Senate budget plan

CONCORD – The New Hampshire Senate approved, 15-9, an $11.6 billion spending plan for the next two years.

With legalized slot machines providing a critical $205 million chunk of revenue in the plan, the scene is now set for a showdown with the House, which solidly rejected gambling plans earlier this year.

What's in the Senate budget?

Major features of the Senate budget plan:

$11.6 billion in spending, including nearly $3.3 billion in general funds. Overall spending up 12.6 percent over 2008-09.

Legalizes slot machines, expected to bring in $205 million in license fees and revenue from a maximum of 13,000 machines at race tracks and North Country slot parlors.

The Senate's budget is so bad it should be scrapped

The recession may have made the state's budget situation worse, but today New Hampshire's Senate wants to retaliate by passing a budget that will make the recession worse. The horrible experiment senators hope to embark on makes few concessions to difficult fiscal times, goes out of its way to attack businesses and the potential jobs they could have brought when recovery starts, and just for good measure kicks students out of charter schools.

Ken Merrifield: Lower taxes would bring a faster recovery

There's a simple rule about government policy and how it affects our economy. High tax rates do not bring high revenue. Low tax rates bring economic vitality, and the revenue follows accordingly.

State House Dome: Lynch eyes new tax on refinancing

CONCORD – If you're thinking of refinancing your mortgage, you might want to act fast.

Gov. John Lynch is looking at a proposal that would tax refinancings the same way we now tax real-estate transfers.

The basic idea is to pull refis into the existing tax, and to lower the current 1.5 percent tax rate. Eleven other states already have a similar tax in place. It's not clear if the proposal will be ready by the time the Senate meets to vote on a budget plan on Wednesday.

Another idea in the wings is to look closely at limited liability corporations, which can be structured to escape business taxes on big payouts to owners.

The Senate Finance Committee directed the Department of Revenue Administration to comb through tax laws to find every little hole a potential taxpayer could slip through and find a patch. Lynch spokesman Colin Manning said the refi tax idea is one result of the DRA's work.

New Hampshire Bankers Association president Jerry Little said a meeting at the governor's office last week left a lot of questions unanswered. That includes what the refi tax rate will be, and how it will apply to businesses that file multiple mortgages that, in essence, cover each other.

"Those are pretty major details," he said.

Ralph Coppola, past president of the Mortgage Brokers and Bankers Association, hasn't met with Lynch's staff yet, but thinks the tax would clash with Lynch's efforts to help homeowners avoid foreclosure.

The Senate also relies on suspending the credit that businesses take against the Business Profits Tax, based on their Business Enterprise Tax payment.

The Business and Industry Association plans to publicly protest the change tomorrow. The New Hampshire Advantage Coalition's Matt Murphy argues the idea, "should be dead on arrival; many homeowners in our state are already trying to keep their heads above water."

The BET change would face a tough fight in the House. Finance chair Rep. Marjorie Smith said the move "takes a bad tax and makes it worse, and I can't think of anything more unfair to business than that."

The Senate budget relies heavily on gambling, but if it meets its expected demise in the House, options will have to be available. A refi tax might be one.

The Senate gaming plan assumes $185 million over two years from 15,000 slot machines at tracks and casino halls around the state. That includes 4,000 machines in the North Country, half of them in Coos County. That works out to about one machine for every 17 Coos residents.

The Granite State Coalition Against Expanded Gambling, which has fought gaming tooth and nail for years, thinks revenue estimates are inflated, even though they've steadily declined over the past few years. It says gambling incomes will be delayed for up to two years while the state enacts rules for control agencies, conducts criminal background checks, and waits for local communities to vote and for developers to get their machines in place.

The last gambling bill to come before the House was defeated by a more than 3-to-1 margin.

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OPPOSING A TOLL HIKE: The toll hikes that Gov. Lynch hopes will pay for his highway funding plan are far from a sure thing.

Executive Councilors set the toll rates, and they're not fans, said Councilor Beverly Hollingworth.

Lynch wants tolls to go up 50 cents, to $1.50, at main toll booths in Hooksett and Bedford. On connecting ramps and the Spaulding Turnpike, they'd go up 25 cents.

The new money would be used to bring open road tolling on I-93 and the F.E. Everett Turnpike, and to cover highway maintenance on divided highways throughout the state.

"I haven't talked to a single councilor who favors it," Hollingworth said.

One sure vote against higher tolls will be Councilor Deb Pignatelli. She's fought for years to get toll booths pulled out of Merrimack, where residents feel trapped between toll plazas. Imagine trying to tell voters there why it's important that they continue paying tolls to repair roads for folks in Littleton and Hanover.

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YOU'VE GOT MAIL: There may be a new U.S. Senate candidate sending literature to your mailbox soon. In fact, it may be there already, from STEWARD of Prosperity, the group founded by Nashua investor Fred Tausch. He's working with Concord's Michael Dennehy, the former national political director for Sen. John McCain, and has targeted announced Democratic Senate candidate U.S. Rep. Paul Hodes in the most recent STEWARD mailer.

Tausch said, "A number of people have encouraged me to run for office, and that's not something I've ruled out." Tausch said when he founded his group early this year that he supported Barack Obama's presidential campaign. He contributed $2,300 to Obama, according to the Center for Responsive Politics. Tausch said Friday he's a registered Republican.

He preferred to focus on Hodes, whom he said voted for the federal stimulus bill, then criticized AIG for generous bonuses it gave company executives. He said that was hypocritical of Hodes, adding "That set him apart from the bunch."

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CHARTER SCHOOL CAP FLAP: New Hampshire has never been seen as exactly friendly to the charter school movement. Only when approval power was taken away from local voters did the movement advance at all.

But enacting student layoffs seems a bit extreme. The Senate has adopted a policy in the budget to cap student enrollment at a level that would actually force schools to cut the number of students. The cap is 850 total statewide in 2010 and 950 in 2011.

Bill Wilmot of Seacoast Charter School said charter schools already have enrollment of 935 students.

"We have certain targets built into our charters, and we are being held to that by the Department of Education. Now the Senate is forcing us to go against our charters," he said.

Because it treats charters differently from other schools, the provision could jeopardize the state's federal stimulus money, Wilmot said.

"We are going to try and direct (the Senate's) attention to that," he said.

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CIVICS AND SOUTER: The move to put civics education into school curriculum will get a boost from the highest court in the land.

Retiring U.S. Supreme Court Justice David Souter has signed onto an effort by the New Hampshire Supreme Court Society to produce a civics curriculum for statewide use.

Society president Susan Mary Leahy said Souter is already involved with the effort.

"We are delighted David has agreed to participate in the first round of discussions," Leahy said. "This is a very, very serious effort and we're hoping that he and other people of influence will help move this forward."

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ON THE MOVE: Rep. Ed Butler has moved up to become chairman of the House Commerce Committee. Now in his second two-year term, Butler succeeds Tara Reardon of Concord, who resigned to become Commissioner of the Department of Employment Security ... Democrats scored a coup by attracting former Republican Rep. Jim MacKay to the fold. MacKay plans to run for the Concord seat Reardon left vacant. MacKay served in the Legislature for five terms, including a stint as chair of the Health and Human Services and Elderly Affairs Committee. He most often voted as a moderate member of the GOP, favoring the smoking ban and boat speed limits, and worked hard on mental-health and addiction issues ... Rep. Peter Leishman of Peterborough has been awarded a Toll Fellowship by the Council of State Governments. Leishman heads to Lexington, Ky., in September for a week of meetings with 39 other fellows from other state legislatures ... Rep. Bob L'Heureux has put out the word the state is looking for young applicants for the "Hunt of a Lifetime" program. Anyone age 21 or younger suffering terminal or life-threatening illness qualifies for a permit to hunt any game species, including moose, under the program. Details and applications are available at www.nhsci.org.

Soak the Rich, Lose the Rich

Mr. Quinn and other tax-raising governors have been emboldened by recent studies by left-wing groups like the Center for Budget and Policy Priorities that suggest that "tax increases, particularly tax increases on higher-income families, may be the best available option." A recent letter to New York Gov. David Paterson signed by 100 economists advises the Empire State to "raise tax rates for high income families right away."

Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.

And the evidence that we discovered in our new study for the American Legislative Exchange Council, "Rich States, Poor States," published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.

Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.

Martin Feldstein, Harvard economist and former president of the National Bureau of Economic Research, co-authored a famous study in 1998 called "Can State Taxes Redistribute Income?" This should be required reading for today's state legislators. It concludes: "Since individuals can avoid unfavorable taxes by migrating to jurisdictions that offer more favorable tax conditions, a relatively unfavorable tax will cause gross wages to adjust. . . . A more progressive tax thus induces firms to hire fewer high skilled employees and to hire more low skilled employees."

More recently, Barry W. Poulson of the University of Colorado last year examined many factors that explain why some states grew richer than others from 1964 to 2004 and found "a significant negative impact of higher marginal tax rates on state economic growth." In other words, soaking the rich doesn't work. To the contrary, middle-class workers end up taking the hit.

Finally, there is the issue of whether high-income people move away from states that have high income-tax rates. Examining IRS tax return data by state, E.J. McMahon, a fiscal expert at the Manhattan Institute, measured the impact of large income-tax rate increases on the rich ($200,000 income or more) in Connecticut, which raised its tax rate in 2003 to 5% from 4.5%; in New Jersey, which raised its rate in 2004 to 8.97% from 6.35%; and in New York, which raised its tax rate in 2003 to 7.7% from 6.85%. Over the period 2002-2005, in each of these states the "soak the rich" tax hike was followed by a significant reduction in the number of rich people paying taxes in these states relative to the national average. Amazingly, these three states ranked 46th, 49th and 50th among all states in the percentage increase in wealthy tax filers in the years after they tried to soak the rich.

This result was all the more remarkable given that these were years when the stock market boomed and Wall Street gains were in the trillions of dollars. Examining data from a 2008 Princeton study on the New Jersey tax hike on the wealthy, we found that there were 4,000 missing half-millionaires in New Jersey after that tax took effect. New Jersey now has one of the largest budget deficits in the nation.

We believe there are three unintended consequences from states raising tax rates on the rich. First, some rich residents sell their homes and leave the state; second, those who stay in the state report less taxable income on their tax returns; and third, some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place. This is why high income-tax states have such a tough time creating net new jobs for low-income residents and college graduates.

Those who disapprove of tax competition complain that lower state taxes only create a zero-sum competition where states "race to the bottom" and cut services to the poor as taxes fall to zero. They say that tax cutting inevitably means lower quality schools and police protection as lower tax rates mean starvation of public services.

They're wrong, and New Hampshire is our favorite illustration. The Live Free or Die State has no income or sales tax, yet it has high-quality schools and excellent public services. Students in New Hampshire public schools achieve the fourth-highest test scores in the nation -- even though the state spends about $1,000 a year less per resident on state and local government than the average state and, incredibly, $5,000 less per person than New York. And on the other side of the ledger, California in 2007 had the highest-paid classroom teachers in the nation, and yet the Golden State had the second-lowest test scores.

Or consider the fiasco of New Jersey. In the early 1960s, the state had no state income tax and no state sales tax. It was a rapidly growing state attracting people from everywhere and running budget surpluses. Today its income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and its schools rank among the worst in the nation -- much worse than those in New Hampshire. Most of the massive infusion of tax dollars over the past 40 years has simply enriched the public-employee unions in the Garden State. People are fleeing the state in droves.

One last point: States aren't simply competing with each other. As Texas Gov. Rick Perry recently told us, "Our state is competing with Germany, France, Japan and China for business. We'd better have a pro-growth tax system or those American jobs will be out-sourced." Gov. Perry and Texas have the jobs and prosperity model exactly right. Texas created more new jobs in 2008 than all other 49 states combined. And Texas is the only state other than Georgia and North Dakota that is cutting taxes this year.

The Texas economic model makes a whole lot more sense than the New Jersey model, and we hope the politicians in California, Delaware, Illinois, Minnesota and New York realize this before it's too late.

Mr. Laffer is president of Laffer Associates. Mr. Moore is senior economics writer for the Wall Street Journal. They are co-authors of "Rich States, Poor States" (American Legislative Exchange Council, 2009).

Tax cap debate to hit Senate floor

CONCORD - A proposed change to state law that would let cities and towns amend their charters to allow tax caps will likely be fought on the Senate floor next week.

A move to add the change to an unrelated House bill got nowhere in a Senate committee yesterday.

The tax cap idea is being pushed statewide by the New Hampshire Advantage Coalition, a conservative group that works to keep taxes low and to limit government spending. Caps typically limit local spending increases to the regional rate of inflation. Cities with caps in place are Franklin, Nashua, Laconia, Dover and Rochester.

A Merrimack County Superior Court ruling in March said state law and the constitution bar adoption of tax caps in municipalities that operate under charters.

Acting on a challenge that Concord officials filed, the court said the cap would interfere with a city manager's duty under state law to present a budget to city officials.

Republicans say their proposed amendment adjusts state law to satisfy the court's concerns. It protects those communities that have adopted caps, and gives voters in other towns and cities the right to decide whether they want a cap in place, and includes an override provision if voters think cuts go too far. Democrats have resisted the amendment.

The Senate Public and Municipal Affairs Committee did not consider the cap proposal yesterday in a vote proponents hoped would bring it to the full Senate.

Committee chair Sen. Betsi DeVries, D-Manchester, said her committee did not consider the amendment because none of its members proposed it. She said Senate procedures require a committee member to bring an amendment forward.

"No one picked up the ball," said DeVries, who is also a Manchester alderman. She opposed putting a tax cap amendment on Manchester's ballot this fall. Rep. Ken Hawkins, R-Bedford, sponsored the cap language and tried to hook it to HB 183, a bill he sponsored that repeals selectmen's authority to remove insane or incapacitated local officials.

DeVries's committee voted 3-2 to kill the bill itself, and the amendment was not discussed. Senate rules prevent an amendment to a bill a committee recommends should be defeated, DeVries said.

Senate Minority leader Peter Bragdon, R-Milford, said the issue is far from over.

"It will make an appearance somehow, somewhere," he said. "We'll find a home for it no doubt," adding that he wants to act next week. Sen Jack Barnes, R-Raymond, a member of the Public Affairs committee, said he'll vote for a cap in the Senate. "It's enabling legislation that let's folks decide whether they want it or not."

Do something about property taxes

This session the Legislature has a chance to do something about property taxes. More accurately, legislators have an opportunity to give you the choice to do something about property taxes.

The Senate is about to consider a bill that would allow some communities the option of voting on a tax and spending cap. It wouldn't impose a cap or automatically schedule a vote. Rather it would make clear that cities and towns with a charter form of government could place a spending cap amendment on their ballots.

This bill as far as it goes isn't all that radical. Five cities have already adopted spending caps: Franklin, Nashua, Laconia, Dover and Rochester. A few more will consider spending caps this November.

Since Franklin adopted its cap 20 years ago, it was generally understood that cities and towns with charters could adopt a charter amendment by collecting petitions and having a vote on the ballot. Renewed interest in spending caps began with Laconia's successful petition drive and adoption in 2005. Since then, Dover and Rochester have followed suit.

Continue Reading Do something about property taxes

Tax coalition pushes for new cap law

Consider it a new form of appeal. In March, a judge found that a proposed tax cap in Concord was against state law, so proponents of the tax cap are trying to change the law.

The New Hampshire Advantage Coalition has worked with legislators on an amendment to a House bill that would specifically allow cities and towns to adopt a tax or spending cap.

"This isn't so much about allowing a tax cap; this is a voting rights issue," said Matt Murphy, director of the New Hampshire Advantage Coalition. "Whether people in communities should be able to amend their charter through citizens' initiatives and be able to vote on those amendments."

The House bill amendment was sponsored by state Rep. Ken Hawkins, a Bedford Republican, and added to a bill that Hawkins was already sponsoring. The original bill, which passed in the House and is now in a Senate committee, would repeal a law authorizing selectmen to remove certain town employees whom the selectmen judge to be insane or incapacitated.

Continue Reading Tax coalition pushes for new cap law

Franklin Mayor Merrifield at Tea Party

NH State Democratic Chair and DNC Vice Chair Ray Buckley calls
Tea Party attendees “unhinged mob that had lost their minds”

For Immediate Release April 21, 2009
Media Contact: Mike Biundo, Chairman
mbiundo@yourmeridian.com
(603) 540-2572

NHAC Chairman Michael Biundo calls for Ray Buckley to apologize

Concord, NH- Today, New Hampshire Advantage Coalition Chairman Mike Biundo denounced NH Democratic Party Chair and DNC Vice Chair Ray Buckley’s comments at a public debate hosted by the Manchester Chamber of Commerce regarding attendees to April 15th Tea Parties nationwide. He demanded a public apology not only to the 1000’s NH attendees but the hundreds of thousands taxpayers, small business owners, and middle class families that attended these events nationwide.

NHAC Chairman Mike Biundo stated “As host of NH’s largest Tea Party in Manchester, I take offense to Chairman Buckley’s derogatory comments and think he should apologize to the thousands of those who attended events around the state and the hundreds of thousands who attended from around the country. The small business owners, taxpayers and middle class families that came out to protest a government that taxes too much, spends too much and is driving us to fiscal insolvency deserve our respect, not his condemnation. These hard working decent people represent what is good about our state and our nation.”

Taxpayer Tea Parties took place in several cities in NH on April 15th drawing thousands of NH families, business owners, and middle class taxpayers of all political affiliation to these events.

Biundo continued “It’s unfortunate that Chairman Buckley chooses to make this a republican versus democrat issue, these Tea Parties were in fact about New Hampshire and American issues, issues that the people are yearning for this Congress and our elected leaders to address. Chairman Buckley has blindly followed the lead of other tax and spend politicians, claiming that these participants are ignorant of why they attended these Tea Parties. The message from April 15th couldn’t be clearer, this is our country, this our state, and we are willing to work together to take it back.”