In Budget Debates Ignore Anecdotes and Check The Data

Charlie Arlinghaus

April 29, 2015

As originally published in the New Hampshire Union Leader

Much of the work of state government is in a holding pattern until the state Senate finishes its work on a draft of the budget. This is probably a useful time to remind you that so much of what we think we know isn’t true. It would be helpful to check your data ask your correspondent (the fellow bending your ear and complaining incessantly) if he’s checked his data. If nothing else, it will make his complaints about whatever happens in the budget more compelling.

New Hampshire’s fiscal policy is often subject to competing claims about tax burdens. Usually pontificators on both the right and left are guilty of exaggerating some claims, relying too heavily on anecdotes and adjectives, and rarely checking their facts to see if what someone once told them is still true (well, not me, obviously I’m talking about everyone else).

Describing a proposal as draconian or profligate is often determined by our pre-existing mindset. Adjectives are determined by philosophy rather than facts.

At the center of these ideological divides are taxes, property and income. The more conservative among us are enthralled with our lack of an income tax and don’t talk too much about property taxes (this is the group into which I fall). The more liberal emphasize their desire for “tax reform” and the general burden of property taxation.

Property taxes are among the most hated probably because we notice ourselves paying them. The federal income tax is removed from our paycheck before we ever see the money so it causes less psychological pain. I suspect that if we had to write a check every month or quarter to the feds we would be even more annoyed about income and payroll taxes.

New Hampshire’s property tax burden is the fourth highest in the country, not a badge of honor. However, an interesting study by the Tax Foundation found that from 1999-2009 (the latest data then available) our state and local property taxes increased by much less than most other states in the country. We ranked 41st in property tax growth.

Property taxes are high but not growing as fast as in the rest of the country. In New Hampshire, they are a large amount of the state and local tax burden. But in general, we tax people less than other states do and that fact has remained the same over time. Thirty years ago, New Hampshire’s state and local tax burden was 44th highest in the country. In the most recent year’s study by the Tax Foundation we remain 44th.

A more common area of data free analysis is state spending. Many conservatives will impose their view of Washington on Concord and conclude that New Hampshire is rife with waste, fraud, and out-of-control spending profligacy. This does not appear to be the case.

Comparing this year to last year can be difficult because of relabeling some spending and deciding whether to count actual or budgeted spending, authorized authority or money spent. Over decades, comparisons are more obvious.

Instead of comparing this fund or that, let’s look at all non-federal spending — the money we have to raise with our own taxes and fees whether dedicated, segregated, or mixed in. State money crested $3 billion in the 2004 budget. All non-federal sources were budgeted at $3.12 billion. Eleven years later, the 2015 budget (which ends June 30) has $3.74 billion in non-federal sources (70% of total budgeted spending).

The budget has grown but not as fast as inflation. Adjusted for inflation, 2015 includes $150 million less in state-paid spending than eleven years earlier. By the way, federal spending in the state budget had also increased less than the rate of inflation from 2004-2015. However, the new Medicaid spending makes up for that and all the state savings as well.

There is generally enough in the data to allow you to make the ideological point you wanted to make anyway. Supporters of the overspending theory will point out that state spending is only small because of budget cuts in the 2011 passed budget or because a larger than average recession deflated tax revenues and kept spending wish lists in check. Nonetheless, it’s hard to argue that recent history includes a great deal of out-of-control binge-spending at the state level.

When the next draft of the budget is presented, try to ignore a few of the adjectives and instead check the math.

1 reply
  1. William Fortune says:

    Taxes are not relevant unless they are compared to income, like net income after Federal taxes; like the marginal propensity to spend. Also, taxes need to be evaluated relative to the number of hours needed to work to pay for items like food, utilities, shelter and other life sustaining needs.

Comments are closed.