Sunday, April 10, 2011

How Does New Hampshire Do It? An Analysis of Spending and Revenues in the Absence of a Broad-based Income or Sales Tax

Interesting report from the Federal Reserve...

New Hampshire is unique in New England
in that it levies neither a broad-based income
nor sales tax. Although high property tax bills,
education mandates handed down by the
courts, and fiscal crises past and present have
led some Granite Staters to question the continued
feasibility of this approach, the state
has thus far maintained its course.
New Hampshire’s ability to avoid a
broad-based tax stems partly from the fact
that governments there simply spend considerably
less, on average, than their neighbors.
In fiscal year (FY) 2007, New Hampshire
state and local governments combined spent
$6,442 per capita—20 percent less than the
New England average. The difference is even
starker if we consider state government alone.
Observing New Hampshire’s lack of
broad-based taxes and low public spending,
other states around the region have asked
whether they can emulate the state’s fiscal
model. This paper explores the Granite State’s
spending and revenues, to shed light on how
it has avoided a broad-based income or sales
tax. The analysis examines the factors that
drive New Hampshire’s lower-than-average
per capita spending, and the revenue sources
the state relies on to pay for that spending in
lieu of an income or sales tax.