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Wednesday, September 16, 2009

Charlie Arlinghaus- Sure, let's debate an income tax


There's no topic so dangerous that it can't be talked about. Legislative leaders who want to have a discussion about taxes should be applauded, not castigated, for wanting to engage in open debate. That open debate should include ideas that you and I like, and ones we don't like as well.

The House Ways and Means Committee is the tax committee in the New Hampshire Legislature. The committee is planning a broad seminar with state and national analysts to examine New Hampshire's tax structure. So far, it sounds like a good idea. The difficulty for some is that Rep. Susan Almy, chairwoman of the committee, is quite open about the fact that she thinks an income tax would be a good idea.

I think her willingness to take a position is helpful to an open discussion and that an income tax ought to be discussed rather than being strictly forbidden as some would suggest. By this point, almost everyone in public life knows something about an income tax and has a position for or against it.

If we are to seriously discuss how taxes affect New Hampshire's economy, create incentives or disincentives for jobs, development, education, preservation or whatever, why would we place anything off limits? I believe an income tax is a bad idea, but I'm more than prepared to explain why in a discussion. If talking about it were dangerous to my belief, I'd have to rethink my belief. In fact, I want to talk about it in the hopes of convincing others. That's generally the idea behind debate.

The reason we're having this discussion is that there is a significant budget problem. It is neither the greatest calamity in the history of the state, as some suggest, nor a minor blip that will go away when the economy picks up again, as others have said.

Temporary revenues, such as the Washington bailout money, and temporary spending changes mean the starting hole for the next budget will be just more than $600 million (we raise about $5 billion over two years from general state taxes and fees). That hole may get worse if taxes fall short of the budgeted projections. The first two months of returns are worrisome, although not definitive.

In that climate, should we have a discussion about taxes? Absolutely. Should we limit that discussion in particular ways? No. Let's talk about whether business taxes are creating a competitive disadvantage, the mix of state versus local taxation, the impact of our taxes on cross-border sales, the cumulative burden of taxes, everything and anything.

But just as we shouldn't limit the discussion of taxes, neither should we limit the discussion to taxes. The governor has established a commission to discuss expanded gambling as a potential revenue source in New Hampshire. Its conclusions will be necessarily incomplete because it won't include all taxation and all spending.

A forum run by the Ways and Means Committee can look at incentives and disincentives of taxation, but probably can't discuss spending without getting into turf battles with other parts of the Legislature.

Just as a complete discussion of taxation must include all taxation, a complete discussion of the state's budget difficulties must include both the spending and taxation sides of the equation.

A gambling commission can present the likely positive and negative impacts of that form of raising revenue, but it doesn't tell policy makers whether the step is necessary. It doesn't address the ways we can spend less money that might be weighed against the costs and benefits of gambling.

We should expect an honest discussion of taxation to have the same limitations. Past commissions have started with the assumption that more money is required: "Which method is the least onerous way of increasing the amount of money we take from people through taxation?"

Putting the cart before the horse in that way leads to bad decision making. So far this year, a total of 41 taxes and fees have been raised. They weren't raised because careful analysis decided that these 41 were a good package and made sense in the economic context of our other taxes. On the contrary, much of it occurred in the hustle and bustle at the end of the budget process without due deliberation of the state's total revenue structure and its economic impact.

Those of us who felt that no taxes at all should be raised during a recession believed what we did because of the economic impact of taxation. As such, we should welcome a more deliberative and less hurried discussion of taxes and the economy.

I agree with the character in the movie "1776" who said "I've never seen, heard, nor smelled an issue that was so dangerous it couldn't be talked about. I'm for debating anything."

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.

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