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Mark Fernald

August  16, 2012


Mark was elected to the State Senate in 1998 and 2000. He was the first Democrat to hold the District 11 seat since before the Civil War, and was the Democratic nominee for Governor in 2002.

Mark is treasurer of the Granite State Fair Tax Coalition and practices law in Peterborough with the firm of Fernald, Taft, Falby and Little. 

He has served on the boards of the Peterborough Chamber of Commerce, the Colonial Theatre in Keene, the Kiwanis Club of Peterborough, the Monadnock Community Early Learning Center, the Peterborough Children’s Choir, and Union Congregational Church.

 

 

In November New Hampshire voters will be asked to amend the state constitution to permanently ban an income tax. It's an amendment that property taxpayers should reject.

The people who wrote our Constitution in 1784 understood that our government is strengthened if the cost of government is distributed fairly among the people. So they added a clause to the New Hampshire Bill of Rights that includes the following:

"Every member of the community has a right to be protected by it, in the enjoyment of his life, liberty, and property; he is therefore bound to contribute his share in the expense of such protection."

In 1784 our Legislature enacted a tax law that included this statement of purpose:

"It is necessary there should be an Equitable Rule . . . so that every person may be Compelled to pay in proportion to his Income."

The founders of New Hampshire would be shocked to learn that we levy huge property taxes on people with modest incomes. In 1784, houses were not taxed at all because they don't generate any income.

CACR 13 is The Pledge on steroids. It is an attempt to keep taxes in New Hampshire exactly as they are now, forever, by prohibiting an alternative to the property tax. Before we enshrine this into our Constitution, let's see if everyone is paying "his share."

We have a tax system that is made by and for the top 1 percent. The households in New Hampshire with the highest incomes - the 1 percent with incomes $480,000 and up - on average pay just over 2 percent of their incomes in state and local tax. The folks in the middle, on average, pay about 6 percent. The lowest income people have the highest tax burden. They pay, on average, over 8 percent of their income in state and local tax.

Only five states have tax structures that are more regressive. You can read more at http://itepnet.org/whopays.htm.

The root of the problem is the property tax. New Hampshire relies on the property tax more than any other state. Much of what we expect government to do - educate our children, plow our roads, prosecute criminals, provide nursing home care for the elderly, police, fire - is paid in part, or primarily, with property taxes. Our property taxes are the second highest in the nation and twice the national average.

The problem is getting worse. State aid to cities and towns has been cut, and cut again. In the past 12 years, the total property tax bill in New Hampshire has doubled. Very few people have seen their incomes double.

If you vote for this amendment, if you vote for people who take the Pledge against any new tax, in two years your property taxes will be 5 to 10 percent higher, and in 12 years they will probably have doubled.

The proponents of this amendment will prattle on about the "New Hampshire Advantage" as if we are living in a tax paradise. The facts say otherwise: The property taxes on an average home in New Hampshire are three times what they would be on a similar home in Delaware, and twice what they would be in Florida.

If you took a New Hampshire family with an average income and an average house and moved them to a similar house in Florida - where they have a sales tax, but no income tax - the family would pay less tax in Florida than they do here. If you moved that family to Delaware - where they have an income tax, but no sales tax - that family would pay less tax in Delaware than they do here.

For retired homeowners, the comparison is even more stark. A retired homeowner with a modest income, living in a modest home, pays more state and local tax in New Hampshire than he would pay if he moved to any other state. Our taxes on retired homeowners are the highest in the nation. Every retired homeowner, and everyone who plans to retire in New Hampshire, should be voting against this amendment.

There are plenty of other reasons to oppose this constitutional amendment:

-- We should not write tax policy into the Constitution.

-- Each Legislature and each generation should be free to make its own decisions about taxes and spending.

-- Tying the hands of the Legislature may harm New Hampshire's credit rating, costing us millions of dollars in increased bond interest.

-- It is unnecessary. If the voters don't want an income tax, they will vote accordingly.

But in the end, this amendment is a vote about whether we will turn our backs on our founding principle that all citizens pay their share of the cost of government.

Voting for this constitutional amendment is a vote for higher and higher property taxes, a vote for the top 1 percent, a vote against the middle class, and vote to continue mistreating our retired homeowners.

Voting against this amendment keeps our revenue options open, even if we don't want to use all of them now.

Supplemental notes:

Here's the chart showing how the tax burden is distributed in NH:

You can read the whole ITEP study at: http://www.itepnet.org/whopays3.pdf  and you will see that the tax burden on the low and middle incomes are lower in Delaware, while the tax burden on the higher end is higher (although the tax burden on the wealthy in Delaware is still less than on the middle and low incomes).

The Tax Foundation puts out a lot of information that allows us to compare states and the taxes they collect.  Here's the link to their report. 

You will see in tables 29 and 30 that NH property taxes are third-highest in the nation, both as a percentage of median home value, and per capita.  You will also see that property taxes in NH are about twice what they are in Florida, and more than three times what they are in Delaware.

The effective property tax rate in NH is 1.92%.  This is 13% higher than in Connecticut, 19% higher than in Vermont, 31% higher than in Rhode Island, 64% higher than in Maine, and 78% higher than in Massachusetts.

The problem with the property tax is that it hits the middle class much harder than the wealthy, and hits retirees much harder than the middle. Retirees typically pay over 10% of their income in property tax, the middle pays about 6%, while the wealthy typically pay less than 2%.  

This is how NH can have low taxes overall, and the highest taxes in the nation on retired homeowners.

I can't point you to a web site where the state and local tax burden for retirees or middle income families is shown.  I looked and couldn't find such a study.  So I did one of my own.  I called the tax collectors in cities in ten different states to figure out their tax rates, homestead exemptions, elderly exemptions, etc.  I purchased a program that allowed me to do a tax return in every state that has an income tax.  I used IRS figures to estimate what a family of a given income would pay in sales tax.  This is how I came to the conclusion that retired homeowners in NH pay more in state and local tax than retired homeowners in any other state, and that middle income families in median houses in Delaware pay less in overall taxes than in NH.

Because the tax structure in Delaware is much less regressive than in NH, retirees have a state and local tax burden that is a fraction of what retirees pay in NH.  The middle class in Delaware is also taxed less than in NH.  The key difference between the two states is that Delaware is able to get away with very low property taxes because they have an income tax, so that the wealthy pay their fair share of the cost of government.  I think we should become more like Delaware in the way we tax, for the sake of our retirees and middle class families.  A constitutional ban on an income tax would of course make that impossible, ensuring that we tax retirees out of their homes for generations to come.

A study done for the State of New Hampshire in 2001 showed that the wealthiest 12% of households have half the income in NH, but they paid far less than half the taxes.  From this statistic you can see that an income tax would not 'punish only the working class' because half the income taxes paid would come from the top 12%.  (It would actually be more than half, because personal exemptions that would have a bigger percentage impact on the low and middle income ranges.)

I hope you find all this useful and enlightening.


Email Mark at mark@markfernald.com


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