Tough times are the right time for change

On Jan. 20, Barack Obama was sworn in as our president, carried to victory in the 2008 election by a message of change. Since Nov. 4, it has only become more clear that major change will have to be brought about to right our economy and restore our position in the world.

Why, then, are we not talking about major change in New Hampshire? The current economic crisis amplifies the structural deficit in our state’s tax system that thoughtful analyses, such as several papers published by the New Hampshire Center for Public Policy Studies, have identified for many years. As pressure grows to bring the state budget into constitutionally mandated balance, there is only one significant way to maintain service levels, and that is to cost-shift state obligations to the counties and local communities.

When that happens, there is no choice but to raise county and local property taxes, which are already reaching confiscatory levels in most areas of the state.

Clearly to me, and a group of thoughtful legislators and other public policy experts who met throughout the past summer, major change in the New Hampshire tax structure is overdue, and the current situation provides the perfect opportunity to bring about that change.

I have again introduced a bill that our group hopes will provide the basis for open and honest discussion about tax reform and how to solve the state’s structural deficit while also setting up a system for a permanent solution to the education funding dilemma.

Here are the bill’s highlights:

• A statewide education property tax is set at $5.50 per $1,000 of equalized valuation, with a homestead exemption of $200,000 provided for every principal place of residence. In other words, there is no tax on the first $200,000 of tax valuation.

• A flat 5 percent education income tax levied on New Hampshire taxable income, with exemptions of $15,000 for the taxpayer, taxpayer’s spouse, and $10,000 for each dependent of the taxpayer. There is also a credit for the entire amount of the statewide property tax paid on the primary residence of the taxpayer. A renter’s credit is also provided.

• A “circuit breaker” provision is included so an abatement is granted to property-tax payers whose total property taxes exceed 8 percent of household income.

• Proceeds of the statewide education property tax and the education income tax are dedicated to funding the state’s obligation to public education.

• The current business enterprise tax and the interest and dividends tax are totally repealed, and the business profits tax rate is decreased from 8.5 percent to 7.5 percent.

• State revenues currently dedicated to the education trust fund from the business profits tax, the tobacco tax, the rooms and meals tax, the real estate transfer tax and the utility property tax are reallocated to the state’s general fund.

There are many details of this comprehensive tax reform bill that space does not permit us to list, but the overall impact of the bill is to eliminate New Hampshire’s structural revenue-raising deficit, to provide a permanent education-funding solution, to give the state more stable and predictable revenues, and most of all, to reduce New Hampshire’s reliance on the property tax and establish ability to pay as the primary criteria for state taxation.

We are under no illusion that this bill will become law under the present administration, with Governor Lynch’s repeated pledge to veto any general sales or income tax. But the least that should happen is an open-minded discussion about how we go about solving the problems inherent in our present taxing policy.

Rep. Jessie Osborne of Concord is a Democrat and member of the House Municipal and County Government Committee.