Spending Cuts Overshadowed by Higher Taxes in NH

Friday, July 16, 2010 2:08 PM by Renae Bartusch

There is some good fiscal news coming out of New Hampshire this week.  Governor John Lynch ordered all state departments to cut their budgets by 5 percent for each of the next two fiscal years.  This cut was announced after it became clear that federal “stimulus” dollars are starting to run dry. While we applaud the governor’s office for realizing that federal largesse cannot sustain the state’s bloated spending, it’s hard for us not to say we told you so. We warned states that the increased spending mandates upon which the acceptance of federal “stimulus” funds was contingent would come back to haunt them and as the federal revenues start to run out, this is becoming more evident than ever.

What’s more, New Hampshire has continued to ignore its insolvency by raising taxes to pay for its spending.  Effective June 10, the tax rate for tobacco products other than cigarettes has increased from 48.59 percent to 65.03 percent of the wholesale sales price.  Since 2009, there has been $161 million in new and proposed taxes.  This amounts to $121 in new taxes per person. States were ranked by the change in tax burden per person and New Hampshire came in at number 11.

We have been calling on states to tighten their belts as tax revenue evaporates. The economic recession should have been a lesson in the perils of overspending – unfortunately, the disbursement of billions of federal dollars that allowed states to continue their profligacy unencumbered was too charming a snake oil to ignore. We are glad New Hampshire has decided to start cutting some of its spending to cover the cost of punting earlier on spending decisions. However, true spending reform is achieved when states stop expanding their bottom lines and increasing the burden they place on their taxpayers. Until the state stops raising taxes to fund its overspending, we are underwhelmed by these efforts.

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