July 18, 2007


People in the Granite State really do live free - of income taxes (L. IAN MACDONALD, July 11, 2007, Montreal Gazette)

New Hampshire, famously, has no state income tax and no sales tax. None. Zero. Nada. Massachusetts, the free-spending liberal state next door, is in some flinty New Hampshire circles scorned as Taxachusetts.

No one seeking state-wide office in New Hampshire would ever propose a personal income tax or sales tax. At least, no one with any thought of winning.

"You would have to take the pledge," Drisko says.

No new taxes.

When the first George Bush broke a famous 1988 campaign pledge, "Read my lips, no new taxes," the voters of New Hampshire reminded him of it by punishing him in the 1992 presidential primary, flocking to right-wing maverick Pat Buchanan. Bush put out a grim two-word statement, "Message understood."

But how, in the absence of personal tax revenues, does the state run its services and maintain its infrastructure?

Well, there's the revenue from the renowned tax-free state liquor stores. There's the state lottery, tickets available at the liquor stores. There's excise tax on tobacco. There are state tolls on the Interstates. There's a business profit tax, an interest and dividend tax, a state education property tax, a timber tax and even a gravel tax.

But no personal taxes, and no sales tax. Yet the New Hampshire House recently passed a budget that saw expenditures increase by 25 per cent. And this in a state whose constitution requires a balanced budget. How can that be?

It is, Dick explains, covered by the previous year's surplus. So, a state with no taxes usually runs a surplus.

"What would you say," I asked him, "if the government proposed a tax cut, and only 27 per cent of the voters were in favour of it, and 71 per cent favoured investments in new services instead?"

"I'd say that was pretty unusual," he allowed.

I explained this was, indeed, the case in Quebec, New Hampshire's next-door neighbour to the north.

Of course, the two government models aren't exactly the same. Quebec, one of the highest-taxed jurisdictions in North America, allocates about 45 per cent of spending to delivery of public health care, which doesn't exist in the U.S. Quebec also subsidizes private secondary education and public universities to a degree unheard of anywhere else in North America.

Thus, if only 27 per cent of Quebecers wanted a tax cut, that could be because 42 per cent of them don't pay any provincial income tax, and would prefer to receive more services they're not paying for anyway.

Dick Drisko shook his head in wonderment.

Demand for free services is logically unlimited.

Posted by Orrin Judd at July 18, 2007 12:10 AM
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