Is New Hampshire Really As Anti-Tax As It’s Cracked Up To Be?

Donkey Hotey / Flickr

StateImpact wants to know: Is New Hampshire really an anti-tax state?

I’ve written a few posts recently about Republican presidential candidate Herman Cain’s 9-9-9 plan.  (You can read the first post here.)  The second post, “Cain’s 9-9-9 Touches Third Rail of New Hampshire Tax Policy,” generated a number of comments from StateImpact readers, but this one, part of a larger comment from Anonymous, stood out:

“…As for the whole notion Granite Staters — unlike any other around the nation — don’t like paying taxes, have you met a lot of people who don’t live in NH who LIKE paying taxes? Come on, we are not some exotic breed. We need to stop swallowing our own marketing about “tax-free NH.” Paid your property taxes lately?”

Anonymous’ comment leads to an interesting question — how anti-tax is New Hampshire, anyway?

It’s important to make some points clear:  This post is not a judgment on New Hampshire’s attitudes toward taxes.  This post is also not an endorsement of any particular tax policy.  It’s only an attempt to determine whether it is, in fact, fair to characterize New Hampshire as an “anti-tax state.”

How The New Hampshire Tax Burden Stacks Up Nationally

For a long-time Granite Stater, New Hampshire might not seem particularly anti-tax.  Besides, New Hampshire has the second-highest property taxes in the country, after New Jersey.

But there’s a key difference between these two states.  New Jersey has the highest property taxes in the country…and a general income tax and a general sales tax.  By contrast, New Hampshire uses its high property taxes, in part, to make up for revenue lost by not having broad-based income or sales taxes.

The only other state not to have either a general sales or income tax is Alaska, which has the advantage of oil revenues.

So how do the other no-sales-tax states stack up to New Hampshire, in terms of tax burden?  A good place to look is the Tax Foundation, a research group based in Washington, D.C.

Using data up to FY 2009, the Tax Foundation did the following:

“For each state, we calcu­late the total amount paid by the residents in taxes, then divide those taxes by the state’s total income to compute a ‘tax burden.’ We make this calculation not only for the most recent year but also for earlier years because tax and income data are revised periodically by govern­ment agencies. The goal is to focus not on the tax collec­tors but on the taxpayers. That is, we answer the question: What percentage of their income are the residents of this state paying in state and local taxes?”

Here’s the map the foundation published last winter (click this link for a map you can zoom in on):

Tax Foundation

State and Local Tax Burdens By State: 2009

There are five states that don’t have a sales tax.  But that doesn’t necessarily alleviate individual tax burden, as the Tax Foundation map demonstrates.  Here’s an individual look at the burden faced by sales-tax-free states (as of 2009):

  • Alaska: 6.3 percent. Ranks 50th
  • Delaware: 9.6 percent.  Ranks 23rd
  • Montana: 8.7 percent.  Ranks 35th
  • New Hampshire: 8.0 percent.  Ranks 44th
  • Oregon: 9.8 percent.  Ranks 17th

So the Granite State actually ranks in the bottom 10 states for tax burden.  Only Alaska, Nevada, South Dakota, Tennessee, Wyoming and Texas offer residents a lower overall tax rate.

How Granite Staters Feel About Taxes

Of course, the historic rate doesn’t exactly get at the idea of anti-tax sentiment.  It’s just a snapshot of the current tax environment.  So what’s the tax culture of New Hampshire?  Andy Smith, a political pollster who directs the University of New Hampshire’s Survey Center, offers some perspective:

NHPR

Part of Governor John Lynch's continued popularity in New Hampshire can be traced to his stance on broad-based taxes.

“What we find for a sales tax is that 31 percent of residents say they would be more likely to vote for someone who was in favor of a sales tax,” Smith says, “but 57 percent are more likely to vote against somebody who favored a sales tax.  So the opposition is about two-to-one against a sales tax among people in the state.”

(The prospects are even worse for politicians in favor of an income tax, which you can see in Smith’s research here.)

Smith notes that New Hampshire’s famous Pledge–in which people running for state office promise not to support an income tax or a sales tax–plays a key part in the state’s political life.  And it’s illustrative of New Hampshire’s anti-tax culture:

“It’s something that certainly Republicans have historically taken the Pledge, and even Democrats will regularly take the Pledge,” Smith says, adding:

“[Democrat] John Lynch, the current governor, got into that position, I think, in large part, because he did take the Pledge before he ran for office in 2004 and during his record four terms in office, hasn’t made any moves to pass an income tax or a sales tax, even in times when the state budget was in crisis.”

But as Anonymous noted, who really likes to pay taxes, anyway?

At this point, I think it’s best to draw on personal experience.  As a New Hampshire newcomer who’s lived in several other states, I can say that so far, New Hampshire appears to be the most skittish about taxes.  For the purposes of comparison, I’ll delve into my experiences with two states I’ve spent significant amounts of time in:  My home state of Iowa, and Washington, where I lived for several years before coming to New Hampshire.

The Heartland’s Hearty Support For Taxes

Iowa has both a general income tax and a 6 percent statewide sales tax.  The sales tax money goes into the state’s general fund.  But if residents of counties, cities, or unincorporated areas want to generate a bit of sales tax revenue for their own purposes, they can petition for what’s called a Local Option Sales Tax.  If they get enough signatures, the community in question can hold the question up to a vote.  And if it passes, the community can tack another one percent onto the state sales tax.

Jimmy Emerson / Flickr

Iowa: Fields of Opportunities (to pay more sales tax...)

As anyone who follows presidential politics will tell you, Iowa’s not known for its strong liberal bent.

But the Local Option Sales Tax?

It’s extraordinarily popular.  If you look at this map of the state, at least one community (or Local Option Jurisdiction) in all 99 counties has approved this tax.  And in 96 out of 99 counties, people in most, if not all, jurisdictions have approved the extra tax.

Would a majority of New Hampshire residents vote to raise their taxes in their communities?  Given residents’ general resistance to a broad-based sales tax–it’s probably safe to say “no.”

A “Blue” State’s Surprising Tax Politics

Then there’s Washington State.  It’s widely perceived as a mecca for liberal politics.  And that’s true to some extent…if you live on the small sliver of land west of the Cascades, dominated by Seattle and its satellites.  But, if you live somewhere in the large stretch of land spanning from the Idaho border to the foothills of that far western mountain range (like I did), it’s a different story.

flickrer42/Flickr

Seattle plays a big part in shaping Washington's politics...but the state's a lot more politically diverse than many outsiders think.

Eastern Washington’s home to the state’s second-largest city: Spokane, which is the Inland Northwest’s cultural and political hub. People on that side of the state tend toward libertarian conservatism.  They tend to vote Republican.  They vote to repeal sin taxes on things like candy bars.  And they–along with the state’s liberal contingent–have no qualms about repeatedly passing ballot measures that all but forbid legislators from raising state taxes.  (If you want all the gory details of Washington’s tax tussles, just Google “Tim Eyman,” the state’s referendum-filer-in-chief.) This despite the fact that, like New Hampshire, Washington has no general state income tax.

Coming from Iowa, which has both an income tax and a sales tax, I thought I’d come out ahead in living in eastern Washington, which has a similar cost of living to the Midwest.

I was wrong.

While Washingtonians are fed-up with their state tax rate, it seems local taxes are a horse of another color.  Like Iowa, Washington has a statewide sales tax.  And the rate’s a bit higher than Iowa’s, at 6.5 percent.  Although the state’s well-known for its large social safety net, voters in individual communities are expected to step-up quite a bit when it comes to basic services.

Want to fund mental health care in Spokane County?  Vote for a tenth-of-a-percent county sales tax add-on.  The same goes for certain public safety expenditures, bus service, criminal justice funding, jail funding, etc.  The end result?  The state tax rate of 6.5 percent shoots up to 8.7 percent in the city of Spokane, and 8.1 percent in Spokane County.

So…Is New Hampshire Actually Anti-Tax?

Keeping in mind that it tends to be dangerous to make blanket assumptions, there are some clear takeaways here:

Jeff Seeger / Flickr

All signs point to "yes" on the question of whether New Hampshire is really an anti-tax state

  • New Hampshire is one of two states without a general income or sales tax.
  • Between the top two property tax states, New Hampshire is the only one that doesn’t have both an income tax and a sales tax.
  • Only six states have a lower individual tax burden than New Hampshire.
  • It’s accepted practice that politicians promise not to institute a general income or sales tax.
  • Polling shows that Granite Staters wouldn’t support a politician who did want to institute a sales tax–by a 2:1 margin.
  • Meanwhile, residents of two other states–which conventional wisdom would say are on opposite sides of the political spectrum–have continually voted to raise their own sales taxes.

So is New Hampshire actually an anti-tax state?

All signs, it appears, point to “yes.”

Comments

  • James McElroy

    Does the Tax Foundation include taxes that NH renames as fees? The vast majority of our auto registration for example is what most states would call an excise tax.

  • Astrida

    Lived in NH, left because without sufficient taxation, citizens didn’t get sufficient services. Live in Maine now and am enjoying the things my tax dollars pay for.
    Interesting, too, that NH ranks dead LAST in the nation for support of education– only 7% of the state university’s budget now comes from the state, and they are going through drastic cuts as a result. Morale is nonexistent, staff are worn out from years of belt tightening and doing more and more with every less — I worked there for 15 years and finally had enough.

    • Peter1438

      Exactly Astrida, there are no hand outs here in NH… NH is a state where you support yourself, so it is a great thing that you and people like you left. We have what you call personal responsibility. I think your education numbers are, well, wrong. But it is good that you left.

      • Amanda Loder

        Peter1438 and Astrida: What a conversation! It’s this sort of dichotomy I’ve seen noticed since coming to New Hampshire that has me intrigued. On the one hand, there appears to be a minority of people who would support greater taxes if they got more government services. On the other hand, there appears to be a somewhat larger group of people who prefer give up a certain level of services in order to bear a lighter individual tax burden.

        In this piece, I cited some research Andy Smith did at UNH for the 2009 Granite State Poll about popular support for taxes. (There’s also a link to the poll in the piece.) What I found particularly interesting is that when asked which source of funding (i.e., taxes), voters preferred, most went for a more voluntary tax. While three percent favored more property taxes, 19 percent said introducing an income tax, and 25 percent said establishing a sales tax…40 percent said they preferred legalized gambling. Of course, since UNH conducted that poll, the gambling tax has been lifted.

        All of this does have me wondering, though, if the state couldn’t continue to balance the budget through aggressive cuts, to what extent would Granite Staters support sin taxes? Would they support reestablishing a tax on gambling winnings? Would they support a light tax on liquor (complicated, I know, due to out-of-state sales volume), increasing the cigarette tax, or even taxing non-necessities like candy and soda? Or does the general toleration for taxation stop at gambling?

      • We Need A Sales Tax in NH

        New Hampshire is on a death spiral and we are limping along on the backs of property owners. We have an aging population. Many retirees who own their modest homes after paying off their 30 year mortgages are finding that they cannot afford their ever-increasing prpoerty taxes. This is a regressive system and free-staters are making things even worse. Astrida and other hard workers like her will continue to look elsewhere for a sane balance of taxes for services, and I cannot blame them one bit!

        • holdencf

          Wrong wrong wrong. NH is the fastest growing state in New England. It is growing BECAUSE we have no state income or sales tax (not to mention no state capital gains tax which MA, RI and CT all have as well as NY and CA, among others). S.NH has been booming because people shop here versus surrounding states because we have no sales tax. But when they come, they eat which generates meals tax revenue.Property taxes are effectively user taxes. 40% of all property taxes goto schools and another 20% are used for local services sych as libraries, dumps, parks and sports grounds. Its the remaining 40% that I have an issue with. That goes to the state that it in turn gets to decide how to best use my money. Under the Democrats, there was an $800Mn deficit for the tow year budget cycle. That gap has been closed to $80Mn of which more than $60Mn is a pension shortfall. What do they do to cover that deficit because it is unconbstitutional for our state to run a deficit? They issue bonds which they roll over in ever inctreasing amounts which jams that debt down to my children. Under republican leadership we cut over $700Mn in spending we could not afford. If you don’t like the state because it doesn’t given enough free stuff to people who don’t work, go to MA. They dole it out like candy. That’s why they just RAISED state income taxes from 5.25% to 6.25%.

  • Keith Smith

    You did a pretty good job at introducing some basics of tax policy and talking about NH.

    To add to that, state taxes and fees were reduced in NH in 2011. State taxes and fees are expected to be reduced in NH again in 2012. The only currently announced Democratic candidate for governor in NH has already taken the no new broad based taxes Pledge.

    As for property taxes in NH, they vary greatly by location in NH are aren’t much different overall than OR, WA, NY, ME, MA, CT or NJ. I only pay a few hundred dollars per year and in some parts of NH there aren’t property taxes.

    NH was selected as the Free State Project. There are around 1,000 FSP participants currently in NH with more moving to NH every week. FSP participants work for liberty in their lifetime (that’s the motto) and I don’t know of a single person among the group that wants higher taxes. In fact, some have already co-sponsored bills to lower fees or taxes in NH, bills that have passed and are now law in NH.
    Learn more if you want http://freestateproject.org/

  • Keith Smith

    My understanding is fees, excise taxes and tickets tend to be lower in NH than most states.

    Also, it is worth pointing out that many NH fees were reduced this year (auto registration, business opening fees, marriage, pet store…) along with many taxes (LLC tax, tobacco, gambling, business.)

    As for auto ownership, two different surveys show that NH is the least expensive state to own an automobile.

    • Amanda Loder

      That’s interesting info. Could you send a link to some of those studies? As StateImpact’s resident revenue nerd, I seriously love facts and figures.

      One of the points about NH tax policy that I find particularly interesting is that, on the face of it, it appears to be more of a nickel-and-dime approach, rather than a large, up-front bill. (Of course, many property owners would certainly dispute that.) Something worth looking up, however, is “How Does New Hampshire Do It?” a report published last spring by Jennifer Weiner at the Boston Fed. One of the things she notes is that no single state tax makes up 20 percent of the revenue pie. (That is, if you count the Business Profits Tax and the Business Enterprise Tax separately.) It seems property tax does make up the largest slice, at 16 percent, followed by the business taxes–BPT at 15 percent and BET at 11 percent. As for how fees and excise taxes compare to other states, I couldn’t say. But I do find it interesting that the state’s goal tends to be diluting the burden across the tax base by implementing single-digit tax rates on things like meals and rooms, insurance premiums, interest and dividends, etc. rather than implementing a broad-based approach.

  • Irishyankee811

    The property tax is a regressive way to raise revenues vs. an income tax. It is true, as others have commented, that NH lacks services and safety nets for its citizens. Funding of state colleges is very poor, so in-state tuition very high compared to other states. I was astounded to pay $270 to renew my clinical social work license — how much do they think social workers earn?? I wonder how it compares to more highly paid licensed workers such as nurses, plumbers?? We have a great shortage of affordable housing for low income and elderly and NO medical assistance except for the most destitute (those with income under $700/month — if you get more than that, the difference is your monthly deductible that you pay out of pocket — so, a $400 MONTHLY deductible if you get a benefit of just $1000 per month. . . . .). So, if you get $1000/month, pay $850 for your rent, the state won’t help you with medical costs until you have spent over $400 in a given month. . . . .but you don’t have that much left over after rent, right?? Right.

  • Anonymous

    My experience is that NH is a good place to live if you’re in the workforce, but not so nice if you’re retired and living on a fixed income. When you couple the high property tax on one’s home with the Interest & Dividends tax on savings and investment, the tax burden on retirees becomes disproportionately high. If there’s a silver lining to that, it’s that today you can’t get much income at all from your savings. So, we’ve got that going for us, which is nice.

    • Amanda Loder

      You know, you’re not the first person I’ve heard that from. With both state and local property taxes, it can work out to be a heavy burden, especially if you’ve got some high-value property. And, if you’re depending on a 401k or other market-driven retirement fund, the five percent Interest and Dividends tax could certainly be a hit–especially if, against all odds, your account’s actually doing well. You’re right though–with the Fed keeping interest rates at rock-bottom, there’s not much interest to tax on savings, at least.

      The flip-side of that, of course, is (potentially) lost revenue for the state.

      I’ve managed to do a spot of basic research on this, and it sounds like there’s a so-called “elderly exemption” for some state property taxes, based on age, income, and assets, as well as a veteran’s exemption. Is this something you’ve had any luck looking into? If so, have you found New Hampshire to be fairly generous with these exemptions, or are they just a “drop in the bucket,” so to speak, or too difficult to qualify for?

  • Dorsie

    I am a widowed, retired 77-year-old living in a small cape home in a modest neighborhood in a small city. My property tax burden is 23.5% of my adjusted gross income. This doesn’t relate to the 8% tax burden and NH rank of 44th lowest in the 2009 The Tax Foundation study.

    While my city taxes average at a rate of $20 per K, many wealthy towns pay far less. Moultonborough has been paying around $8 per K for years.

    Paying taxes should not be objectionable for the services one receives. But only raising tax revenues through property, which has no relationship to income, is not equitable. Therefore many become “property rich and tax poor”, if you can call a home valued at $140,000 rich? A loss of a job, or a reduction of interest income or any major expense creating a financial loss does not reduce one’s tax burden in New Hampshire.

    • holdencf

      We have no broad based state income tax in NH. Interest and dividends are taxed at 8% which I assume is the tax yoiu are paying. The property tax millage rate in Bedfor and Winham are LOWER than comparable towns in MA such as Lexington, Winchester, Sudbury, Needham and Concord. The rest of the towns in NH have lower property tax than Bedford and Windham so you are misinformed.

  • tdandld

    We have lived in New Hampshire since 1997. We bought a house in 2002. Our property taxes were around $2,500.00 a year. Last year we paid over $8,000.00. The town has us assessed at $273,000.00. We had a real estate agent put a market value on it last year. He MAY be able to list it at $200,000.00, but doesn’t think it will sell for that amount. We have gone through abatements. We actually received $1,000.00 back a couple of years ago, but now when we file the abatement all the selectmen say is ‘no’. Yeah, NH is such a great state to live in if you live in an apartment.

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