Cook on Concord: Rethinking NH’s tax policies

Without enough revenue coming in, how will we fix roads and pay for schools?

State revenue and how it is raised has been in the news from Concord recently, in several respects. A reported $400 million deficit in funds available to repair and build roads as set forth in the state 10-year highway plan, a proposed constitutional amendment to prohibit passage of a state income tax, and measures to force votes on local school budgets and other property tax-related measures, all have called attention to how New Hampshire pays for things.

Government is a system for us all to decide what we want to do together, because we cannot do it alone. For example, we could not construct highways individually, but we can collectively. Yet, when it is clear road tolls and gasoline taxes do not produce enough money to maintain our road system, leaders oppose increasing the road toll, or propose raising it only for those who do not live here.

Tolls are a fee designed to have those using the roads pay for them, not a tax. Our roads are not just used by out-of-staters, but primarily by our residents. We should pay for them. And while they are at it, the legislators should figure out a way for owners of electric cars, heavier than gas models and harder on roads, to pay the equivalent of what they would pay in gas taxes, if their autos used gasoline.

Proposals to put a prohibition on passage of a state income tax in the New Hampshire Constitution are especially inappropriate. Somehow, we have developed a “religion” that says taxes paid by everyone, broadly based, are bad. Where the logic is in that has always escaped me.

Tying the hands of the Legislature, our means of taking action together, is a crude and inappropriate step. More importantly, refusing to distribute the tax burden broadly among those who either have more ability to pay due to higher income, or those who purchase more and would pay more tax on sales, is strange public policy, and policy which leaves us with few options for revenue raising, with the local and state property tax being the default choice.

Action by the Legislature in recent years to cut the rates of, or eliminate entirely, state taxes, such as the repeal of Interest and Dividends Tax, or cutting the rate of business taxes, deprives the state of needed revenue to fund the programs already passed or proposed, and has pushed much of the cost down onto cities and towns.

Consequently, the burden falls disproportionately on residents of different communities, depending on the value of property in them, whether they have lakes and rivers, or the amount of commercial property they can tax.

Not too long ago, a client in a small town in Merrimack County contacted me after a reassessment of the real estate in his town. His next property tax bill had increased 10% over the prior year’s bill, and he was sure he had been abused in the reassessment process.

That led to an analysis that started with the question of what the average increase in assessment for the town was. In this case, it was about 75%. Then, looking at the client’s increase, I discovered his increase was only 72%. His share of the total tax in town, then, had gone down.

If the total town, county and school spending had stayed the same, his tax bill would have gone down accordingly, but it went up 10%. Checking with the town administrator, I was shown the figures for the town, that its total budget supported by the property tax had increased over 10% in one year, largely due to the costs shifted down from the state onto the community.

I advised my client that it was not the reassessment that had increased his taxes, but the amount that had to be supported by the total property tax. He was amazed and somewhat incredulous.

State law requires reassessment of property if the average assessment gets to 80% of fair market value, and increasing sales prices of homes, especially in some towns with many waterfront properties, have made frequent reassessment more common. It has also resulted in huge ranges in the tax increases in different municipalities, often next door to each other.

It is common to hear of people paying many tens of thousands of dollars in property taxes, often to communities in which they have second homes, do not send their children to school, and do not use municipal services to any great degree.

The question needs to be examined whether a more intelligent system would be to have the taxes paid to the state, so that funds could be distributed equitably among all communities in the state, and whether the local property tax has outlived its usefulness.

Our anti-tax “religion” in New Hampshire keeps candidates for political office from discussing the subjects of this column calmly and thoughtfully, forcing them to repeat slogans.

Thoughtful citizens should not be bound by the same restraints. Think about it.

Brad Cook is a Manchester attorney. The views expressed in this column are his own. He can be reached at bradfordcook01@gmail.com.