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Wednesday, October 21, 2009

Live Blogging the Tax Summit- Brian Gottlob

Brian Gottlob- Principal of PoliCon Research, and Senior Fellow of the Friedman Foundation for Education Choice

Gottlob is focusing on expenditure trends in New Hampshire state government. He says since ideal tax structures has competing goals, lawmakers have to chose one or two priorities to make sure any of them are achieved.

Gottlob says that New Hampshire's relative success stems from having a low overall tax burden in a region with high tax burdens. This makes New Hampshire a magnet for high skilled, well educated households.

He says generally, New Hampshire governmetn has spent money where it needs to, rather than on everything which it wants to fund. He notices less poltical balance and less willingness to compromise, which could lead to a larger crisis.

Gottlob says New Hampshire has become a haven for the middle class, with no more high income households than the national average, but a much higher percentage in the middle. He posts a chart showing New Hampshire's relatively lower tax burden compared to Vermont and Massachusetts across the income spectrum. That means both low and high income earners enjoy a favorable advantage. In dollar terms, a two-wage earner family taking home $88,000 saves between $3,1000 and $4,800 compared to competing states.

On migration, Gottlob says New Hampshire loses population to the South and Southwest, but draws new residents from other Northeastern states.

Gottlob says almost every state has a deficit or budget gap, but that states like New Hampshire which have limited spending have the smaller per capita deficit. This is despite having one of the highest drops in revenues in the nation.

Gottlob's thesis is that "New Hampshire taxpayers will not be willing to accept much higher levels of taxation relative to income than they have in the past, and this means the state is on an unsustainable fiscal path."

Gottlob's tracks the "dependency rate" of the population, which includes young children requiring lots of schooling, and seniors receiving Medicare and other services. He says New Hampshire has a lower dependency ratio than the national average, but that will increase faster over the next decade. He also forecasts that with no change in current trends, Medicare vendor payments would consume the entire General Fund by 2025. Meanwhile, school enrollment has fallen, but public school employment has increased.

He says that even as New Hampshire's population increases, the working age population will level off at 900,000 within a decade. This means the percentage of workers at their peak earning levels, and at their peak as taxpayers, will fall relative to the rest of the popultion.

Beyond the current recession, Gottlon forecasts how different tax alternatives would grow in the coming demographic environment. Income and general sales taxes would decline. Business taxes would slow the most. Selective sales taxes and property taxes would be the most neutral. He says both spending and demographic trends need to change.

He offers several alternatives, including slowing growth in education and Medicaid, increasing taxes as a share of income, or shifting the tax structure to encourage working age population to move to and stay in New Hampshire in order to pay taxes and grow the economy. He urges the Committee to avoid both an income or sales tax.

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