On Tax Day, a look at New Hampshire's budget battle

Though the link might seem tenuous — few New Hampshire taxes fall due today — the effect of those ongoing Statehouse discussions will be financially significant for many of us.

Though conservatives often paint a picture of the very wealthy paying the lion’s share of taxes in America, thus supporting those at the bottom of the economic scale, that actually applies only to federal income taxes, which are progressive. That means the more you make, the higher rate you pay.

We’ve always backed that formula. It makes sense that those who have benefited the most from our economic system contribute the most to maintaining it. The problem is, state and local taxes tend to work the opposite way — those who have the least pay the most. At least, they pay the largest percentage of their income. In other words, state and local taxes — including those dubbed “fees” or “surcharges” to help politicians avoid being accused of raising taxes — are regressive.

By far, the major tax people in New Hampshire pay for state and local services is the property tax. This not only hits property owners, but renters pay higher rents to help landlords pay their tax.

According to the Institute on Taxation and Economic Policy, “On average, poor homeowners and renters pay more of their incomes in property taxes than do any other income group — and the wealthiest taxpayers pay the least.”

The institute issues a report every few years noting the effects of state and local tax policies on residents, by income level. It contends a graduated income tax is the fairest tax, property taxes are more regressive and consumption — sales or excise — taxes are most regressive.

New Hampshire relies on a variety of taxes, fees and other revenues to fund its operations. Among them are gas and tobacco taxes, and alcohol and lottery sales, all of which are among the most regressive revenue generators because they rely — some might argue prey — on the poor to a disproportionate degree. Adding Keno in the state’s bars isn’t going to change that for the better.

One of the most important debates among New Hampshire’s leaders right now is the proposed cutting of business tax rates. Both the House and Senate are proposing a reduction in those rates. Since those taxes are among the largest revenue sources for state services, cutting them would leave a gaping hole in the state budget unless services are cut drastically.

The flawed logic behind cutting business taxes is that lower taxes will spur more business — something that’s never been proven and which would require years of lag time, during which the state will suffer — and that old Reaganesque hokum of “trickle-down economics.” Thirty-five years in, giving the rich more money with the expectation that they’ll use it to create more economic opportunity for the lower classes has never worked. Rather, studies show the wealthy save or invest added revenue, while the poor, out of necessity, spend it.

Worse, the heavy, even cruel, cuts to services proposed in the House budget would further shift the cost of services the state should be responsible for to county and local governments, which rely almost wholly on property taxes for funding.

And conservatives’ efforts to pull the rug from under the state’s recent expansion of Medicaid would likely cost the state billions in federal aid and undermine the deal the state struck with hospitals to settle a costly lawsuit over Medicaid payments.

The Granite State’s only income-based tax, the interest and dividends tax, is a flat-rate tax that most hurts those with modest investments, especially seniors whose other income is fixed. But lacking a fairer progressive state income tax, which isn’t happening any time soon, New Hampshire’s best short-term bet to keep from burying those with low or fixed incomes is to maintain programs that help keep necessary costs, such as health care, down, and not to blow holes in the state’s revenue structure.