The November election will include a constitutional amendment to ban an income tax. Whether New Hampshire voters wish to see a ban written into the constitution or not, the vast majority are opposed to an income tax based on the experience of other states.
The ballot vote on an income tax ban isn't exactly a referendum because it divides people into three camps. Those who support an income tax will obviously vote no. Many who oppose an income tax will vote yes. A third group will be anti-income tax, but unwilling to write a ban for all time into the constitution, preferring instead to keep debating the issue every few years. In that sense, support for the amendment will only be a subset of those who oppose a new tax.
Tax systems are complicated, and every state tax system includes a basket of taxes. Some supporters believe that an income tax is instantly fairer than any system that might include property taxation. Of course part of the problem is that no one has ever suggested eliminating property taxes and replacing them with an income tax. Every proposal for the last 90 years has involved adding a new tax, but leaving in place virtually all the others as well.
A decade ago, Democratic Gov. Jeanne Shaheen convened a commission on education funding to look at various new taxes. This wasn't a conservative group hostile to an income tax (in fact, the commission was relatively supportive of one), but it found that, contrary to the rhetoric, “the substitution of a comprehensive income tax for local property taxes would diminish the progressivity of New Hampshire's revenue system.”
I say this only to point out that the fairness or regressivity arguments about taxation are far from settled even on the left side of the spectrum.
Based on the experiences of other states, most conservatives are skeptical about a new tax. While most states that adopted income taxes did so long ago, the two most recent ones did so with at least the partial goal of reducing other taxes. And they failed.
New Jersey adopted a tax in 1975 with the proceeds directed exclusively to a property tax relief fund. Yet New Jersey's property taxes are the highest per capita in the country and show no signs of slowing down.
The more recent experiment was Connecticut. During the 1991 recession, Gov. Lowell Weicker pushed through an income tax coupled with reductions to the corporate profits and sales taxes, although the sales tax was extended to hundreds of new items. The first goal was to raise money, but the second was to create a more stable tax system.
One theory, often espoused despite evidence to the contrary, is that state spending relieves the burden on local taxpayers, and cuts to state spending increase local taxes. Connecticut's experience is that a new revenue source just allows spending to grow through the roof.
Connecticut had been 14th in the country in state and local taxes, with a per-capita burden of $2,900 (New Hampshire at the same time was at $1,900). In the first four years, Connecticut jumped to have the fourth-highest state and local tax burden, and it has stayed there. The state jumped from a per-capita tax burden of $2,900 to one of $3,900 during a period in which New Hampshire went up only $400, from $1,900 to $2,300.
Further, in the first decade and a half after growing government, Connecticut's per-capita tax burden climbed from $2,900 to $7,600 during a time when New Hampshire's state and local taxes increased at half the rate, from $1,900 to $3,700.
A new tax source didn't shift the burden from locals to the state, it merely grew government dramatically, faster than its neighbors, and faster than the rest of the country.
Surely some of the extra tax money was used to help the state help the towns, though, wasn't it? After all, that's the excuse we hear all the time. If the state grows, it will shoulder more of the burden. In Connecticut, passage of an income tax was followed by the very same governor proposing a regular series of cuts to state aid. And Connecticut's property taxes have climbed to become the second-highest in the country.
A big, new revenue source didn't help displace other state sources, nor did it result in revenue sharing with local communities. It merely fueled a huge expansion in the size and scope of state government. Nor did it prove sustainable for the future.
The last Republican governor of Connecticut proposed billion-dollar tax increases for the exact same reasons Weicker proposed his huge tax increase. The current Democratic governor has also proposed a billion-dollar tax increase and cuts to local aid. More money equaled more spending, not more help.
Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord. His email address is firstname.lastname@example.org.