{"id":4244,"date":"2011-12-14T16:11:19","date_gmt":"2011-12-14T21:11:19","guid":{"rendered":"http:\/\/stateimpact.npr.org\/new-hampshire\/?p=4244"},"modified":"2011-12-14T16:30:02","modified_gmt":"2011-12-14T21:30:02","slug":"economics-and-politics-clash-over-nh-tax-revenue-forecast","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/new-hampshire\/2011\/12\/14\/economics-and-politics-clash-over-nh-tax-revenue-forecast\/","title":{"rendered":"Economics And Politics Clash Over NH Tax Revenue Forecast"},"content":{"rendered":"<div id=\"attachment_4260\"  class=\"wp-caption module image left\" style=\"max-width: 260px;\"><a class=\"fancybox\" title=\"Is a structural deficit a real concern for NH...or just a boogey-man cooked up by economists?  Find out after the jump\" href=\"http:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/12\/4602398689_5b14dafcc9.jpg\" rel=\"\"><img decoding=\"async\" loading=\"lazy\" class=\"size-medium wp-image-4260\" title=\"The Deficit And Our Children\" src=\"http:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/12\/4602398689_5b14dafcc9-300x346.jpg\" alt=\"\" width=\"260\" height=\"300\" srcset=\"https:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/12\/4602398689_5b14dafcc9-300x346.jpg 300w, https:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/12\/4602398689_5b14dafcc9-220x254.jpg 220w, https:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/12\/4602398689_5b14dafcc9.jpg 423w\" sizes=\"(max-width: 260px) 100vw, 260px\" \/><\/a><p class=\"wp-media-credit\">Truthout.org<\/p><p class=\"wp-caption-text\">Is a structural deficit a real concern for NH...or just a boogeyman cooked up by economists? We&#39;ve got more after the jump.<\/p><\/div>\n<p>Yesterday, StateImpact <a title=\"Liveblog: Joint Economic Session\" href=\"http:\/\/stateimpact.npr.org\/new-hampshire\/2011\/12\/13\/liveblog-joint-economic-session-2\/\" target=\"_blank\">liveblogged the Joint Economic Session<\/a>.\u00a0 Members of the House and Senate Finance and Ways and Means Committees gathered for hours to hear economists offer projections on where the global, national, and state economies are headed in 2012.<\/p>\n<p>Admittedly, it was pretty dry stuff.\u00a0 And we were ready to do what we&#8217;ve done with our other economic forecast liveblogs&#8211;just wait until an interesting trend or factoid pops up, and highlight it for you.<\/p>\n<p>Then, economist Dennis Delay with the <a title=\"New Hampshire Center for Public Policy Studies\" href=\"http:\/\/nhpolicy.org\/\" target=\"_blank\">New Hampshire Center for Public Policy Studies<\/a> brought up the idea that the state has a structural deficit.<\/p>\n<p>Shortly thereafter, the political fireworks started.<!--more--><\/p>\n<h3>What&#8217;s A Structural Deficit, Anyway?<\/h3>\n<p>Before we go any farther, it&#8217;s important to understand what a structural deficit is.\u00a0 (We promise, what comes after the explanation is definitely worth the wait.)<\/p>\n<p>Basically, when economists talk about a &#8220;structural deficit&#8221; they mean there&#8217;s a problem built into the tax structure:\u00a0 State revenues (taxes) can&#8217;t keep pace with state expenditures.\u00a0 But New Hampshire, of all states, runs pretty lean and mean.\u00a0 So how in the world do we supposedly have this structural deficit?<\/p>\n<p><div class=\"related-content alignright\"><h4 class=\"related-header\">Related<\/h4><div class=\"links\"><h5>Posts<\/h5><ul><li class=\"link\"><a href=\"http:\/\/stateimpact.npr.org\/new-hampshire\/2011\/08\/29\/is-new-hampshires-gas-tax-really-too-high\/\">Is New Hampshire\u2019s Gas Tax Really Too\u00a0High?<\/a><\/li><li class=\"link\"><a href=\"http:\/\/stateimpact.npr.org\/new-hampshire\/2011\/11\/03\/how-lower-cig-taxes-and-lackluster-sales-fit-into-the-bigger-revenue-picture\/\">How Lower Cig Taxes And Lackluster Sales Fit Into The Bigger Revenue Picture<\/a><\/li><li class=\"link\"><a href=\"http:\/\/stateimpact.npr.org\/new-hampshire\/2011\/10\/31\/is-new-hampshire-really-as-anti-tax-as-its-cracked-up-to-be\/\">Is New Hampshire Really As Anti-Tax As It\u2019s Cracked Up To\u00a0Be?<\/a><\/li><\/ul><\/div><div class=\"topics\"><h5>Topics<\/h5><p class=\"topic\"><img class=\"alignleft\" src=\"http:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/08\/6355404323_cf97f9c58e-60x60.jpg\" height=\"60\" width=\"60\" \/><a href=\"http:\/\/stateimpact.npr.org\/new-hampshire\/topic\/taxes\/\">The Essential Guide To New Hampshire State\u00a0Taxes<\/a><\/p><\/div><\/div>As Delay explained it, New Hampshire has two main kinds of taxes&#8211;per unit and ad valorem.\u00a0 Per unit taxes are what you pay on specific items you buy.\u00a0 When you fill up with gas, you pay a set tax on each gallon (unit) purchased.\u00a0 The same goes for cigarettes and other taxed &#8220;units.&#8221;\u00a0 And these taxes can be problematic because they&#8217;re not tied to inflation.\u00a0 The gas tax in New Hampshire hasn&#8217;t been raised since 1993.\u00a0 But the cost of the stuff the gas tax pays for&#8211;building and repairing transportation infrastructure&#8211;has gone up with inflation.<\/p>\n<p>So you&#8217;ve got an underlying problem.\u00a0 These kinds of per unit taxes just can&#8217;t pay for what they used to as the years progress.\u00a0 It&#8217;s a design flaw in the tax system&#8230;or a &#8220;structural deficit,&#8221; if you will.\u00a0 During his presentation yesterday, Delay estimated $765.3 million in 2010 state revenues was made up of per unit taxes that have remained unchanged for some period of time.\u00a0 That number should be a lot higher to keep up with inflation.<\/p>\n<p>The other half of the structural deficit issue, Delay said, has to do with ad valorem taxes.\u00a0 Those are taxes you pay on the value of an item or service.\u00a0 Are you staying in a hotel at the rate of $100 a night?\u00a0 Then adding in the ad valorem Meals and Rooms tax, you&#8217;ll actually pay $109.\u00a0 Since tourism is fairly stable in New Hampshire, even in bad times&#8211;as are certain other ad valorem-oriented sectors&#8211;we could count on $444.7 million in relatively stable revenue in 2010.\u00a0 And we can probably expect something close to that number in the future.<\/p>\n<p>But corporate taxes&#8211;the Business Enterprise and Profits Taxes&#8211;are also ad valorem.\u00a0 And firms are much more susceptible to uncomfortable swings in the market.\u00a0 If they have to lay people off, that&#8217;s less Business Enterprise Tax money firms are paying on employee wages.\u00a0 And if customers don&#8217;t buy their products, that&#8217;s lower Profits Tax revenue making it into state coffers.\u00a0 Delay estimated in 2010, $679.8 million in state revenues came from the &#8220;unstable&#8221; end of the ad valorem spectrum.<\/p>\n<p>All told, Delay told lawmakers yesterday, &#8220;Two-thirds of New Hampshire revenue does not grow with the economy, or is volatile.&#8221;<\/p>\n<p>In other words, we&#8217;ve got a good-sized structural deficit.<\/p>\n<div id=\"attachment_4261\"  class=\"wp-caption module image left\" style=\"max-width: 620px;\"><a class=\"fancybox\" title=\"Economist Dennis Delay presented this graph to lawmakers as one illustration of New Hampshire's structural deficit\" href=\"http:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/12\/2010-NH-State-Tax-Revenue-By-Type.jpg\" rel=\"\"><img decoding=\"async\" loading=\"lazy\" class=\"size-large wp-image-4261\" title=\"2010 NH State Tax Revenue By Type\" src=\"http:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/12\/2010-NH-State-Tax-Revenue-By-Type-620x424.jpg\" alt=\"\" width=\"620\" height=\"424\" srcset=\"https:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/12\/2010-NH-State-Tax-Revenue-By-Type-620x424.jpg 620w, https:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/12\/2010-NH-State-Tax-Revenue-By-Type-300x205.jpg 300w, https:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/12\/2010-NH-State-Tax-Revenue-By-Type-220x150.jpg 220w, https:\/\/stateimpact.npr.org\/new-hampshire\/files\/2011\/12\/2010-NH-State-Tax-Revenue-By-Type.jpg 792w\" sizes=\"(max-width: 620px) 100vw, 620px\" \/><\/a><p class=\"wp-media-credit\">Dennis Delay \/ New Hampshire Center For Public Policy Studies<\/p><p class=\"wp-caption-text\">Economist Dennis Delay presented this graph to lawmakers as one illustration of New Hampshire&#39;s structural deficit<\/p><\/div>\n<p>And Delay noted that really only leaves legislators with two choices every year:\u00a0 Either maintain your current levels of government services and raise taxes to be able to pay for them, or continually cut back services as your revenues fall short year after year.<\/p>\n<h3>The Political Defense Of NH&#8217;s Tax Structure<\/h3>\n<p>Thanks to the tough economy, last session was a particularly hard budget year.\u00a0 So the legislature, pushed by a Republican-dominated House, opted to make a series of deep cuts to various state programs rather than raise taxes.\u00a0 One of the legislators leading the charge was Representative Neal Kurk of Weare, who chairs the Division III Finance Committee.<\/p>\n<p>During the Q&amp;A session following Delay&#8217;s presentation, Kurk raised his hand and passionately defended New Hampshire&#8217;s tax structure.\u00a0 We&#8217;ve transcribed the exchange&#8211;edited slightly for clarity&#8211;below.<\/p>\n<blockquote><p><strong>Rep. Kurk:<\/strong>\u00a0 &#8220;Thank you and welcome again, Dennis.\u00a0 Once again, you used the words &#8216;structural deficit,&#8217; and a deficit is something most of us think of as bad.\u00a0 So this is a negative term.\u00a0 It was concocted by economists who set up values, with respect to the size of government, that vastly differs from those of New Hampshire.\u00a0 So they created a term, &#8216;structural deficit&#8217; to suggest as your expenses grow, your revenue should rise to meet it.\u00a0 If it doesn\u2019t, something bad is the case with your revenue structure.<\/p>\n<p>I put it to you we have a structural balanced revenue structure, designed to do exactly what you said at the end, to make us answer the tough questions\u2014do we want to raise taxes or cut services\u2014every two years.<\/p>\n<p>I\u2019d only point out to you that every state\u2026that does not have a structural deficit\u2014maybe not every stat&#8211;that has income&#8230;and sales taxes, is on a roller coaster ride with only one way of growing government.\u00a0 And that\u2019s tough.\u00a0 Because every time a surplus comes in, they of course satisfy every constituent by spending it.\u00a0 Then the roller coaster goes down in the recession, and they cannot cut.\u00a0 They cannot cut, so they simply raise taxes.\u00a0 So they\u2019re on a path of upward growth.\u00a0 We\u2019re on the path to relative stability.\u00a0 We grow, but we grow at a moderate rate.<\/p>\n<p>I\u2019m sorry to get off on this as a diatribe, because it really isn\u2019t a question, but I can get very upset when people use the words &#8216;structural deficit&#8217; and don\u2019t acknowledge&#8230;that in point of fact, it is a PR term, created by, in my word, liberal economists.&#8221;<\/p>\n<p><strong>Delay:<\/strong> &#8220;I didn\u2019t mean to use the term in a pejorative way, Representative Kurk, and I think your points are well taken.<\/p>\n<p>And I\u2019ll again just say that, one of the things that, however you would name this situation, [what it] forces us to do in New Hampshire is look very hard every year at everything we spend money on, and try to make informed, intelligent choices about it, rather than let things sort of roll along.<\/p>\n<p>So, you know, there are some who might say that, whatever that is\u2014let\u2019s call it an \u2018elephant\u2019\u2014whatever that elephant is, is a very bad thing.\u00a0 There are some who might say whatever that elephant is, is a very good thing.\u00a0 But it is the elephant in the room.&#8221;<\/p><\/blockquote>\n<p>During the exchange, Kurk garnered some laughs&#8211;and knowing nods&#8211;from House Republican leadership.\u00a0 Meanwhile, a lighter smattering of chuckles from their Democratic counterparts went Delay&#8217;s way.<\/p>\n<p>Following the exchange, House Finance Chairman Kenneth Weyler cracked, &#8220;We like elephants!&#8221;<\/p>\n<p>If you&#8217;d like to see the presentation Delay gave for legislators yesterday (complete with cool graphs), you can check out the PowerPoint slides below.<\/p>\n<div class=\"embed-documentcloud\" style=\"text-align: center;\"><a href=\"https:\/\/www.documentcloud.org\/documents\/274797-new-hampshire-economic-forecast-december-13-2011.html\">https:\/\/www.documentcloud.org\/documents\/274797-new-hampshire-economic-forecast-december-13-2011.html<\/a><\/div>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Yesterday, StateImpact liveblogged the Joint Economic Session.\u00a0 Members of the House and Senate Finance and Ways and Means Committees gathered for hours to hear economists offer projections on where the global, national, and state economies are headed in 2012. Admittedly, it was pretty dry stuff.\u00a0 And we were ready to do what we&#8217;ve done with [&hellip;]<\/p>\n","protected":false},"author":28,"featured_media":4260,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[14],"tags":[98,185,501,494,521],"acf":[],"_links":{"self":[{"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/posts\/4244"}],"collection":[{"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/users\/28"}],"replies":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/comments?post=4244"}],"version-history":[{"count":28,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/posts\/4244\/revisions"}],"predecessor-version":[{"id":4275,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/posts\/4244\/revisions\/4275"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/media\/4260"}],"wp:attachment":[{"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/media?parent=4244"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/categories?post=4244"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/tags?post=4244"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}