Q&A with New Hampshire Fiscal Policy Institute’s Jeff McLynch

In December, the Concord-based New Hampshire Fiscal Policy Institute released a report on the state’s tax system. Coming on the heels of a November election that swept in Republican supermajorities promising spending and tax cuts, the institute’s recommendations represented an alternative perspective.

“The source and size of that deficit should compel state policymakers to use a balanced approach in resolving it, an approach that is not limited simply to reductions in state expenditures, but one that contemplates meaningful changes in the state’s tax system as well,” the report said. In short, the report also said, the state should also “ask more of affluent residents.”

The nonpartisan NHFPI, which is funded predominantly by foundation grants, was launched in the fall of 2009, and executive director Jeff McLynch arrived a year ago. NHFPI has joined the state’s think tank ranks, which include the New Hampshire Center for Public Policy Studies and the Josiah Bartlett Center for Public Policy. McLynch previously served as state policy director at the Institute on Taxation and Economic Policy and was a staff member of the U.S. House Ways and Means Committee.

Q. What void do you believe NHFPI fills with your research and analysis of the New Hampshire economy?

A. I think the thing that distinguishes us would really be an explicit focus on low- and moderate-income Granite Staters. We also try to expand conversations about the state budget and suggest there isn’t one solution.

Q. What does the NHFPI advocate?

A. It’s important to look at systems as a whole and to look hard at decisions about cutting spending or increasing revenues. We believe there should be more recognition of the revenue side of the budget, and that means taking a closer look at the tax system.

Q. How do you view the New Hampshire tax system?

A. There are three ways to look at taxes – are they progressive, proportional or regressive? We believe regressive certainly applies to New Hampshire. If you go back over a roughly three-decade period, New Hampshire has been among the top 10 lowest in state and local taxes. This has benefited the top 1 percent of wage earners, who pay four times less in taxes, in proportion to income, than the bottom one-fifth. For example, New Hampshire doesn’t have a homestead exemption, which would lessen the burden of property taxes on lower-income taxpayers.

Q. How does the tax system affect the state government and the budget?

A. There’s no question that Governor Lynch and the Legislature have a challenge ahead of them with the pretty sizable budget deficit we face. It’s made all the more difficult if revenues don’t grow along with the economy and if spending cuts is all they are focused on. We have a revenue system that hasn’t kept pace with the size of state government.

Q. What are the consequences?

A. It means cuts in vital public services are deeper than they have to be and there are economic consequences to those cuts. For example, if you reduce reimbursements to hospitals for uncompensated care, as Governor Lynch proposes, the hospital will have to make up for those costs elsewhere. We have seen the creation of a waitlist for child care for the first time, which can have an impact on the quality of the workforce.

Q. Could the budget cuts slow economic recovery?

A. I think it’s hard to say exactly what will happen, but it’s important to keep in mind some key aspects. Take for instance the public sector – while there will be certain efficiencies to come from reducing the state (government) workforce, those 250 or more who are out of work will be without a paycheck and spending much less money in their communities. That can have a ripple effect. State government is also a key player in the direct purchase of goods and services from New Hampshire companies. If you reduce that significantly, it is going to affect those businesses and communities.

Q. What’s your take on the “New Hampshire Advantage”?

A. I would argue there is too much fiscal emphasis and not enough emphasis on quality of life or the skilled workforce. I believe that the most important aspect for businesses is how profitable it’s going to be and the cost of doing business. There are going to be higher or lower taxes elsewhere for every business, and taking into account state and local taxes is one of many factors.

Q. What would readers finding about NHFPI be most surprised to learn?

A. I would say the quality of information we provide is very high and accessible – not only to policymakers, but to anyone who cares about what’s happening in the state.

Find out more about the New Hampshire Fiscal Policy Institute atwww.nhfpi.org.