NHGOP budget deficit solution? Cut taxes!

by: Mike Emm

Mon Jan 10, 2011 at 09:54:34 AM EST

We heard a lot of blather over the past 4 years from GOP House and Senate leadership about restoring fiscal discipline, closing the budget deficit etc. So now it's their chance to act.  According to their budget guru, Charlie Arlinghaus, we face somewhere between a $666 and $802 million shortfall in the upcoming biennium. His numbers are based on a bunch of assumptions, some realistic and some possibly exaggerated,  but no doubt the combination of slow economic growth and cuts in federal aid means our state faces an enormous fiscal hole. Arlinghaus says this will require a 12% reduction in total spending cuts. Maybe it's not 12%; maybe it's only 8%. But he says in the past we've never managed more than a 1% reduction, so clearly there is a huge challenge.

Unfortunately, our legislators are responding to the challenge with big tax cuts. A quick perusal of the LSRs that have been filed identifies at least thirty bills in the hopper this term that reduce one or more state taxes. Some bills roll back every tax increase enacted since 2006, others reduce tax rates, others give new tax breaks to seniors, veterans, and the disabled. Still others will make it easier for business to use previous losses to cut current taxes or give them bigger tax credits for hiring more people, collecting the Rooms and Meals tax, investing in their operations, and other assorted good deeds.

The surprising thing is how many of these bills are not the usual feel-good ideas from backbenchers that quickly get killed but are 'serious' proposals put forth by GOP leadership with a reasonable chance for passage. I don't understand how they intend to close the budget gap and at the same time cut taxes so dramatically. I suspect they don't either. Their thinking makes about as much sense as saying "My boat is sinking, so I better cut a hole in the bottom and let the water out."

The last budget included temporary reductions to the state subsidy of local retirement costs and municipal aid. While current law requires those "temporary" cuts to be restored, local budget writers would be foolish to suppose they will see next year a dime more than they received this year. The same is also true of school aid and the state subsidy of teacher retirement costs.

But on the bright side, business owners and the wealthy who come here to  retire will be better off. And we'll keep our famous New Hampshire Advantage.