Ideology is a poor substitute for budget math

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As just about everyone in New Hampshire realizes, the Granite State does not have any sales or income taxes. In other states, these two taxes are primary sources of revenue for state budgets. Here, our state budget relies on a large tapestry of smaller revenue sources – user fees, small base taxes, surcharges, the state liquor store, and business taxes. Just like a real tapestry, if you start to tug on the strings you risk ruining the whole thing.

This year’s Republican majority in the state legislature (they have a majority in both the NH House, and NH Senate) isn’t just tugging gently at a few of the strings – they’re pulling as hard as they can.

Earlier this year, Governor Hassan exercised her constitutional authority to veto the disastrous state budget that was rammed through by the Republicans in the legislature. I don’t use the phrase ¨rammed through¨ lightly, or often, but in this case it fits. The entire budget process was handled poorly from the start with the finance committee not even opening a hard-copy of the budget during their work sessions, to having closed-door meetings with a Koch Brothers AFP lobbyist in the middle of budget negotiations.

One of the main problems, and a primary factor in Governor Hassan’s veto, is that the Republican majority in the legislature is trying to push an ideological tax cut that would have an enormous impact on the budget’s future, and seriously hurt our ability to fund the state going into the 2020s. The problem isn’t just about what these needless cuts will do now, it’s about what they’ll still be doing a decade from now.

Why do I say these tax cuts are needless?

Simply put – nobody needs them, and they won’t have any positive impact on our economy or budget. Business groups in the state have spelled out that tax cuts like this won’t help them expand, and that they need infrastructure, an educated workforce, and above all they need demand for their products rather than a small fraction shaved off their tax bill.

What’s worse is that the people pushing for these tax cuts, Republicans in the legislature, openly admit that they won’t have any positive economic impact and won’t expand the tax base. It’s 100 percent ideology.

In a letter earlier this year, Speaker Jasper said, “As to the business tax cuts, I do not believe that cutting them will bring in more revenue, nor do I believe that by themselves they will make New Hampshire a more attractive state for businesses to locate to or to expand,” while Senate President Morse admitted openly to the Sentinel Source, “We never came in and said, we’ll lower the business taxes, and we’ll have all this growth, and we’ll offset it,” showing that they had no intention of even trying to offset these needless cuts.

So, forgetting the politics, will these tax cuts pay for themselves? The simple answer is “no.”

Keith Hall, who is the director of the congressional budget office and was appointed by Republicans, said recently at a press briefing that, “The evidence is that tax cuts do not pay for themselves, and our models that we’re doing, our macroeconomic effects, show that.”

This is just the latest confirmation in decades of evidence showing plainly that arbitrary tax cuts do not have enough of a stimulus effect (and often have no stimulus effect at all) to compensate for the loss of direct revenue. What’s worse, according to projections from the New Hampshire Fiscal Policy Institute which were published in July, these cuts are going to get even worse in the long run than they are now. The revenue coming from business taxes, in inflation adjusted figures, still hasn’t recovered from pre-recession levels and yet these folks want to make even deeper revenue cuts. According to the same NHFPI report, we would need to see 10 percent growth of the state-wide economy to make up for these cuts alone (we’re likely to see growth closer to 6 percent, which is an optimistic figure).

It’s not as-if the Republicans working on the budget don’t understand these very basic mathematical concepts – it seems as if they just don’t care.

Of course, with AFP dumping money into the state trying to run attack ads against Governor Hassan since her veto, some might ascribe a more sinister political motive to these budget moves – but I tend to feel that it’s just business as usual for Republicans in the legislature relying on ideology instead of math. It’s way beyond just trying to “reduce the size of government” these days, and some are left to wonder at what point we stop calling it ideology and start calling it sabotage?

I’m not suggesting we jack up the business taxes, and I’m not suggesting we need some huge revenue overhaul. Simply put, the current business tax rates are fine where they are, and are an important part of our state’s overall revenue system. There is an old saying: “If it isn’t broke, don’t try to fix it,” that could easily apply here, but I’ve got a better idea. If it’s not broke, don’t break it.

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Tim Smith

Tim Smith is a State Representative, serving his second term in the New Hampshire House, representing Ward 10 on Manchester’s west side. His professional career is in IT management, and he currently serves on the State-Federal Relations & Veteran’s Affairs Committee in the House. His primary legislative focus has been on campaign finance reform, and fighting corruption. In early 2015 he was elected to the NH Democratic Party’s State Committee. He can be reached at

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About this Author

Carol Robidoux

PublisherManchester Ink Link

Longtime NH journalist and publisher of Loves R&B, German beer, and the Queen City!