Ways and Means Testimony

[Ed. Note: You can find all Ways and Means Testimony at the following location in the NH Generral Court website:

http://www.gencourt.state.nh.us/house/committees/committee_websites/waysmeans/]

 

 

Thank you to the Committees for holding this session and inviting the Granite State Fair Tax Coalition to share what we have experienced over the last 3 years through our grassroots education and outreach work.

 

History of our organization: Founded in 2006, partners include several church denominations, the League of Women Voters NH, and more recently we have added NEA-NH and State Employees Association.

 

Our primary goal has been to spark conversation and enhance understanding by voters around the state about the state’s fiscal policies and its impact on property taxes.

 

We have encouraged this grassroots conversation on state fiscal policy—and how it relates to property taxes—through local warrants. To date, 114 local leaders have done the work of collecting signatures on a citizen’s petition in their town or city to get a “Fair Tax Resolution” placed on their town or school district warrant. The Resolution reads:

 

 

In the process of seeking support for this resolution, these leaders have organized forums in their towns to allow an open discussion of taxation. They have taken a DVD we have produced (in your packets) and worked with their local cable access stations to get it on air. They have written letters to the editor, submitted press releases and blogged to get more people involved in the conversation. Up until recently, there were few meaningful conversations taking place surrounding the topic of taxes. For the most part, it took place about every 2 years, during campaign season and maybe again at budget time, and it primarily took the form of questions or statements about whether one took a pledge against new taxes.

 

Once we asked people to stop and think more about where that kind of conversation has led, we had some really eye-opening and amazing response.

 

We had a sense that this Resolution would pass in many of these 114 towns and cities. But nothing prepared us for the results we had. 83 of the communities where the warrant appeared - 73% - voted yes, including in many SB2 towns, where vote counts are available.

           

Among those counts were towns like Exeter whose citizens called for alternative revenues 1040-589, Goffstown 1484-756, Pelham 1844-818.

 

The passage of the resolution in these communities triggered a letter to representatives, senators and the governor. Some on this Committee may recall receiving such letters between spring 2006 and this year.

 

In short, the warrants served in themselves an opportunity to have a conversation on taxation in a state where the topic has been almost taboo for decades—unless it is to take a pledge for no taxes.

 

Reaction to our warrant was positive. People understand that property taxes are growing at a rate higher than incomes. They understand how their immediate town’s spending relates, but they don’t understand how their home values, rent, business property values can rise without any change at the municipal level. They don’t understand why they pay such a significant portion of their income in some cases merely to keep their homes.

 

The stories we have heard as we went around the state told us there is a severe problem with our overreliance on a property tax to fund 60% of the state’s obligations. On the one hand, the property tax is a pretty reliable source of revenue, but let’s think about what that means: individuals, families, and businesses, whether property owners or renters, pay this without regard to the means at their disposal. It is reliable by design, because it allows little leeway on collection – you pay it whether you are having your best year ever financially, or your worst. You pay it whether your town has decided to fund a school construction project, fix a road or buy a new fire truck –or kicks the can down the road awaiting a “better year.” You pay it at 3 different levels – your town, your county and your state.

 

So, while reliable may be a positive attribute as we consider how to fund government, the next questions must be whether it is fair, sustainable, and doesn’t cause further harm. Beyond the individual concern, we must ask whether it’s in the state’s best interest to rely so heavily on a single source of revenue.

 

Our organization has focused solely on bringing to light the problems associated with our tax structure, and offering an outlet for voters to express their concerns. We are focused solely on the revenue side of the equation, and, though we hold that government bears responsibility to fund services, infrastructure and programs for the betterment of all in New Hampshire, we do not advocate for or against state expenditures.

 

We also do not advocate—as some have misconstrued—for a total elimination of property taxes. We recognize property taxes will very likely always be part of how we fund our needs.

 

Our bottom line is that if the state raises and expends one dollar, 60 cents of that dollar should not come from the property tax. In order to alleviate that current scenario, we do need to find an alternative way to raise that same dollar. And those alternatives must be fair, sustainable, reliable, simple to administer, and transparent.

 

We have not endorsed or opposed specific legislative solutions to the problem, nor do we plan to do so in the near future. We believe that is the job of this body. But we do encourage your constituents to talk—rationally, logically—to you, and to their neighbors. They may have specific ideas and may not be shy about conveying those to you. They sure aren’t shy about conveying those to us! Some have found it frustrating that we are not advocating for their solution. But when they take a step back, they realize we are advocating for their ideals.

 

We recognize the enormity of the task we ask of you. Finding alternatives to the property tax, overhauling the way we think about revenues and finding a way to implement reform so that, in fact, new revenue sources will reduce or mitigate property taxes is a tall order. But this is, we believe, and supporters in those communities that passed the Fair Tax Resolution believe, what must be done.

 

We do not have the resources to recommend a solution to this body. In fact, it is highly unlikely there is a single-pronged solution that delivers all that we ask for. We believe it’s important to evaluate where we are as a state, to learn more about who is impacted by our current system, and who would be impacted the most by any changes. Once that information is in hand, the more complicated questions can be asked about what our state values.

 

Thus far it appears that public conversations surrounding revenue have been related to how to fill holes in the state budget. If more strategic, long-term evaluative methods have been employed, that has remained very much behind closed doors in this building. There has been some news lately questioning whether results of a commissioned study by the Legislature in 2000, which appeared to be pointing the way toward meaningful tax reform in the state, ought to have been released and explored further. The people are not aware, and have heard only the heated political arguments on both sides, primarily consisting of some pledge at campaign time, some rhetoric between parties about who is spending and therefore causing tax hikes, all the while confusing the issue further.

 

I can assure you, your constituents know one thing: their property taxes have risen faster than their income—almost 7% a year in each of the last several years. Let us not kid ourselves: the property tax is a broad-based tax. It’s one that ignores your ability to pay it. Your decision to live in a town or city may not have been based upon it, but it sure may control whether you are able to stay in it, particularly after retirement, a job loss or a tragedy has stricken your family. The average NH family pays 5.8% of their income in property taxes. There are many who pay far, far less as a percentage of income or wealth. There are many who pay far, far more.

 

While our organization believes in fiscal discipline in keeping with traditional New Hampshire values, we do not believe the underlying unfairness and instability of our overeliance on the property tax is a problem that can solely be attacked through spending cuts or heavy-handed caps on spending or property taxes. It is a complex, long-standing problem that requires greater thought, consistency in investigation, and in the end, a long look in the mirror at what we value.

 

In thinking about the best way to bring more logic and process to this conversation, the Granite State Fair Tax Coalition has developed something called “The Lens.” The Lens should be in your packets. The Lens is a set of criteria – in the form of questions - by which to evaluate our current and any new proposed revenues. Viewing revenues through this Lens allows you the ability to more rationally determine its fairness, adequacy, and other factors. It is a tool that we will use in evaluating policy going forward, and it is a tool we will be sharing at the grassroots level with our supporters, with the media, with community leaders. The idea is to take the heated political rhetoric out of what should be a logical, fact-based investigation If everyone speaks the same language, the better our conversation becomes, and the better the ideas for resolving our common problems will be.