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Wednesday, October 21, 2009

Live Blogging the Tax Summit- Lisa Shapiro

Lisa Shapiro- Chief economist for Gallagher, Callahan & Gartrell law firm.

Dr. Shapiro says that the nine previous economists who spoke before her covered many of the points she wanted to address.

Shapiro says that the total level of taxation and the mix of taxes that make up that total are two very different questions. She presented a 2002 report she wrote for the New Hampshire Bankers Association, and says that very little has changed.

As for the specific taxes in New Hampshire's budget, Shapiro says no one tax will restrict or expand total state spending. She says the underlying approach to picking taxes brings the same values as a Legislature's decision on how much to raise. She says she has never seen a proposal to add a new tax that was purely a substitution for something else. "There is always some element of increased spending tied to it." She says in theory, new taxes could simply replace current taxes, but she says that rarely happens in practice.

Shapiro says that while the overall tax burden has declined as a percentage of total income, demand for services is driven by demographics, such as New Hampshire's low poverty rate. She says traditional measures don't get at how efficient state government is in spending that money.

She disagrees with Daphne Kenyon's proposal to increase the BET. Shapiro argues that it makes no sense to increase business taxes during a recession. She says the BET broadened the base of business taxpayers, but repealing the credit against the Business Profits Tax would increase New Hampshire's already high corporate tax rate into an even higher effective rate.

Continuing her criticism of the BET, Shapiro points out that it is a tax on wages, but only in the private sector. Public sector wages aren't taxed. She also says it raises the cost of capital, and discourages investment in the Granite State.

Shapiro says the current recession masks longer-term trends in New Hampshire economy, which had begun turning away from high-tech jobs before the national economy tanked. She says state revenues are still declining, and business taxes are down 5.5% for this fiscal year. Interest and Dividends revenues are down 15%, and Real Estate Transfer Taxes are down nearly 17%.

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