New Hampshire dawdles as two-thirds of states move to collect online sales taxes

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After the U.S. Supreme Court ruled last June in South Dakota v. Wayfair that states could collect sales taxes from out-of-state remote sellers, New Hampshire lawmakers chose not to act. Other states did not make the same mistake. 

Eleven months after the Wayfair decision, the number of states with laws requiring out-of-state businesses to collect and remit sales taxes has more than doubled to 33, a Bloomberg Tax survey shows. 

The number of laws New Hampshire has passed to protect its businesses from these collections remains the same as last year — zero. 

Understanding the need for urgency, Gov. Chris Sununu called a special legislative session last July so lawmakers could quickly put some blocking legislation on the books. A majority of legislators opted to wait. A commonly heard reassurance was that we had plenty of time to act because states would respond gradually to the Wayfair decision. 

In fact, several states had passed laws authorizing cross-border tax collections before Wayfair, anticipating the ruling. Others wasted no time capitalizing on it, as the Josiah Bartlett Center warned. Why would a state wait a moment longer than necessary to expand its taxing power over people who cannot vote for any of its elected officials?  

Now, less than a year after the ruling, two-thirds of the states require businesses to collect and remit sales taxes if they do a specified amount of business in the state. 

And that isn’t the only Wayfair-related bad news. 

The Suffolk Superior Court in Massachusetts this week dismissed a lawsuit filed by six online retailers challenging that state’s effort to collect taxes on online sales retroactively. 

The day before that, the U.S. Supreme Court ruled in Franchise Tax Board of California v. Hyatt that states “retain their sovereign immunity from private suits brought in courts of other States.”

The ruling shields states from suit by private parties in other states. So a New Hampshire seller cannot sue another state in New Hampshire courts to protect itself against a cross-border sales tax collection. 

The Hyatt case was brought by a Nevada resident who had fled California’s hight taxes and was pursued by his former state’s tax collector. The Multistate Tax Commission, which promotes and facilitates cross-border tax collections, filed an amicus brief on behalf of the Franchise Tax Board of California. It had previously filed a brief supporting South Dakota’s pursuit of Wayfair. This week’s ruling is generally considered favorable to states that hope to reach into other sovereign states to collect taxes. 

As The Wall Street Journal wrote in January, a win for California’s Franchise Tax Board would mean that “governments could bully, extort and defraud residents of other states with legal impunity and no political accountability.”

This is now the law of the land, meaning New Hampshire retailers are increasingly at the mercy of foreign tax collectors. 

What has the New Hampshire Legislature done to protect Granite State businesses?

The House Ways and Means Committee retained three bills written to protect business from foreign sales tax collections, refusing to pass them. The Senate did pass Sen. Jeb Bradley’s Senate Bill 242, which is very similar to the bill killed in special session last year. It remains in the House Ways and Means Committee, where it has sat since February 25.     

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Before outlawing plastic bags and straws, try persuasion

The Senate votes Wednesday on two bills to regulate the distribution of plastic straws and bags. Before making outlaws of restaurateurs and grocers, senators ought to consider that there are other, less heavy-handed ways to address the issue of plastics pollution — and they have been shown to work better than bans.

Up for a vote are House Bill 558 and House Bill 560. HB 558 would prohibit restaurants from serving plastic straws unless a customer specifically requests one. HB 560 would prohibit stores and food service businesses from providing single-use plastic carry-out bags. It also would force those businesses to offer reusable bags at a price of “no less than 10 cents” per bag. 

The bills are intended to reduce the prevalence of these plastic items in nature. The targeted businesses, however, do not improperly discard plastic bags and straws themselves. They provide the items as conveniences to their customers. Many individuals later discard the products irresponsibly. 

Littering — which is already illegal — is the major problem to be addressed. But rather than provide people with incentives to stop littering, legislators are seeking to pass laws that would burden New Hampshire retailers and food service providers. 

Recent research suggests that persuasive measures such as education campaigns and strategically placed waste receptacles are more effective at reducing pollution than are plastics bans. 

  • An Australian study published last October in the journal Marine Policy found that education campaigns and additional waste facilities (trash and recycling bins) were far more effective at reducing coastal litter than were coercive policies such as plastic bag bans. “The best model included the total number of outreach programs and waste facilities,” the study found. 
  • That study is consistent with psychological studies that have found a positive impact from campaigns that portray littering as abnormal behavior looked down upon by the majority.  Fewer people litter when they believe that most people like them don’t litter. Campaigns that focus on normalizing positive behavior have been shown effective at reducing littering.
  • Placing more trash and recycling receptacles in state recreation areas where litter is a problem, such as Hampton Beach, is likely to produce sizable reductions in litter. Other studies have shown that more and better-placed waste receptacles can reduce littering.

To reduce plastics pollution, persuasion and incentives can be highly effective. They can reinforce positive social norms, creating a culture of good behavior in which more people voluntarily do the right thing. And they can do this without the negative economic costs that come from trying to achieve the same result through coercive business regulations. 

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Five reasons Gov. Sununu was right to veto paid family leave wage tax

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On Thursday, Gov. Chris Sununu vetoed a Democratic bill to impose a $168 million wage tax on New Hampshire employees for the purpose of limiting their benefit choices and forcing them to accept a state-run paid family leave program. Here are five reasons why a veto was the only responsible action for the governor to take. 

  • The tax to fund a mandatory, state-run paid family and medical leave program was entirely unnecessary. The governor had proposed an alternative program that would allow businesses to opt in. With a voluntary option on the table, there was zero need to create a state-run program funded by a $168 million annual tax on workers’ wages, and which cost $6 million a year to run.  
  • The mandatory program in Senate Bill 1 limited employee and employer choices. By forcing employers to offer this one particular benefit, SB 1 would have prevented many employers from affording other benefits that their employees might prefer. As we have reported before, national polls show that employees tend to prefer many other benefits, such as more flexible schedules and more robust health care benefits, to paid family leave. The bill also forbade businesses from offering a smaller paid leave benefit in combination with other benefits employees might prefer.
  • Because SB 1 potentially overpromised benefits, it allowed a commissioner to raise taxes. Were the bill to become law, employees would expect 12 weeks of paid leave at 60 percent of their pay. But the bill acknowledges that these benefits might exceed program revenues. It authorizes the Employment Security commissioner to reduce benefits or raise the wage tax. It also authorizes the commissioner to reduce the tax or increase benefits if the program generates a huge surplus. A huge surplus would indicate that the tax rate is set too high. The bill in that case should authorize only a tax cut, not a benefit increase.   
  • SB 1 imposed a political preference on businesses and employees that in the long run could make New Hampshire less economically competitive. Paid leave is politically trendy, but trends change. Future employees may demand a different benefit. Passing a law compelling employers to offer this benefit freezes resources that could be used to respond to changing market conditions. This makes employers less nimble and less competitive. 
  • Even if Granite Staters overwhelmingly preferred paid family leave over other compensation options, SB 1’s approach would be economically foolish. But there remains no evidence that Granite Staters demand this benefit over others. Supporters of the bill have cited several University of New Hampshire surveys to claim that Granite Staters support paid family leave. But none of the surveys, including one released on the day of the House vote last week, gives respondents the option of choosing other benefits or higher pay. Nor do they inform respondents that a paid family leave program could mean lower pay raises or reduced benefit options in the future. It’s disappointing that these surveys continue to leave out important information that is regularly included in national surveys of employees’ benefit preferences. 
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Study: Renewable Portfolio Standards raise electricity prices substantially

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Renewable Portfolio Standards increase electricity costs more than was previously believed, a comprehensive study by the University of Chicago’s Energy Policy Institute has found. Moreover, the study concluded that the costs outweigh the benefits of whatever carbon reduction RPS laws can be credited with producing. 

Measuring both direct and indirect costs, the EPI study concluded that “electricity prices increase substantially after RPS adoption.”

RPS mandates cause electricity rates to rise by 11 percent within seven years and by 17 percent within 12 years, the study concluded. And the largest burden of RPS laws falls on residential ratepayers.

“The estimated increases are largest in the residential sector, but there are economically significant price increases in the commercial and industrial sectors too.” 

Studies of RPS impacts have failed to capture the full cost because they tend to measure only the direct cost of new renewable generation, the authors of the EPI study wrote. Their review included a comprehensive examination of indirect impacts such as transmission and stranded costs.

“A particularly striking finding is that the indirect costs of RPS programs, which have not been possible to comprehensively measure to date, appear to account for the majority of RPS program costs,” the study found.

When all costs are included, the study found that RPS laws are an extremely expensive and inefficient way to reduce carbon emissions.

When the carbon reduction attributable to RPS laws is tallied, “the cost per metric ton of CO2 abated exceeds $130 in all specifications and can range up to $460, making it at least several times larger than conventional estimates of the social cost of carbon,” the study concluded. 

“This study joins a growing body of evidence that demonstrates that when climate policies favor particular technologies or target something other than the real enemy—carbon emissions—the result is less effective and more expensive than is necessary. In contrast, the global experiences from carbon markets and taxes make clear that much less expensive ways to reduce CO2 are available right now,” study co-author Michael Greenstone, director of the Energy Policy Institute and former chief economist for President Obama’s Council of Economic Advisors, said in a statement.

In New Hampshire, Senate Bill 124 would raise the state’s RPS from 25% to 60% by 2040. The study suggests that this would produce significant electricity rate increases because rates have been shown to rise along with the percentage of renewable energy utilities are required to use.

“RPS program passage leads to substantial increases in electricity prices that mirror the program’s increasing stringency over time,” the study found.

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Joe Biden promotes occupational licensing reform in campaign kick-off speech

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Joe Biden kicked off his 2020 presidential campaign in Pittsburgh last week with a speech that contained a serious but overlooked policy proposal to expand economic opportunities for all Americans — one that can draw broad bipartisan support.  

“The major moral obligation of our time is to restore, rebuild and respect the backbone of America: the middle class,” Biden said. “As we rebuild it, we need this rebuilding to be all-inclusive, opening the doors of opportunity for all Americans….”

Few Americans would disagree with that idea. One serious obstacle to a broader expansion of economic opportunity, Biden pointed out, comes from anti-competitive occupational licensing laws. 

After advocating the abolition of non-compete clauses for lower-wage workers, saying they exist only “to suppress wages,” Biden said we should “do the same thing with occupational licenses.”

“Why should someone who braids hair have to get 600 hours of training? It makes no sense. It’s designed to keep the competition down. Look, folks, you can’t just transfer your licenses across one state to another. They’re making it harder and harder in a whole range of professions, all to keep competition down. Why should we get rid of these unnecessary hoops out there? Because we have to restore America’s ability and individual Americans to be able to fight for their own dignity.”

Biden is right on this — as was President Obama before him. 

Anti-competitive occupational licensing regulations reduce economic opportunities and diminish human dignity by forbidding ambitious Americans from working in many fields unless they first obtain permission from the government.

The result is a particularly regressive form of wealth redistribution — from lower-income to higher-income workers. 

“Not only does licensing redistribute earnings from unlicensed to licensed workers; it also shifts the burden of unemployment away from licensed workers,” as the Brookings Institution put it a few years ago.

Occupational licensing also limits mobility, as Biden noted and as a study for the Federal Reserve Bank of Minneapolis found. If you get a license in one state, but that license isn’t recognized by other states, you’re stuck. Licensing reduces competition in part by restricting worker mobility. 

This is not a fringe issue. A dramatic increase in occupational licensure has occurred since the middle of the last century. In the 1950s, only about 5 percent of occupations in the United States required a license, but by 2006 almost 30 percent did, a 2008 National Bureau of Economic Research study found. 

Because these requirements have been shown to reduce competition and limit economic opportunities for millions of Americans, they have drawn condemnation from across the ideological spectrum.

The libertarian Institute for Justice has produced compelling reports showing the negative effects of occupational licensure, the latest being available here. The Obama administration undertook its own review of occupational licensing laws and in 2015 released a report that called for widespread reform. 

“There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines,” the Obama administration review concluded.

The Obama administration considered occupational licensing barriers so economically harmful to people on the lower rungs of the economic ladder that it began offering federal grants to encourage state-level reductions in licensing laws. 

Matthew Yglesias of Vox noticed at the time that the administration’s push against occupational licensing laws, which are government regulations, after all, was out of synch with liberal orthodoxy. Reducing these regulations might be even more unfashionable now, as “socialism” has grown in popularity among the far left. 

Yet Biden wasn’t afraid to connect these state laws to his broader fight for economic opportunity and human dignity. For Biden to point out the harmful and demeaning effects of some government regulations in his campaign kick-off speech is both noteworthy and praiseworthy.

This is an economic problem that both the left and the right can agree to fix — if leaders of both sides are willing to address it.

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A solar subsidy double whammy

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Technological innovation has brought solar power to the brink of market competitiveness. It will never be as reliable as a gas or nuclear plant that can run 24/7, but as a supplement it doesn’t have to be. When its price is truly market competitive, individuals and businesses will rush to build their own facilities so they can lower their bills and make money selling power back to the grid. 

We appear to be on the verge of such a transformation, as the price of producing solar power has fallen dramatically in the last half century. By at least some measures, solar generation is already price competitive. And yet the Legislature appears set to pass two simultaneous subsidies that would raise New Hampshire’s already astronomically high electricity rates for the express purpose of creating huge new subsidies for the solar industry (and hydro too).

The first subsidy was passed by the Senate last week. The amended version of House Bill 365 would expand the state’s existing net metering subsidy. Under net metering, utilities are forced by law to pay above-market rates for electricity purchased from small-scale, consumer-owned renewable power generators (think rooftop solar). 

The Senate’s version of HB 365 would allow this net metering “tariff” (read: subsidy) to apply to generators who produce up to 5 megawatts of power. (The current limit is 1 MW.) A 5 MW generator is not a home solar array. That’s large enough to power thousands of homes. Here’s a newly opened 5 MW solar plant in Egypt.)

Supporters say the bill would encourage the creation of new solar facilities. But that isn’t necessary given recent advances in solar technology. That also doesn’t explain why the bill contains a provision to allow existing power plants to convert from wholesale generators to net-metered generators in what can only be a blatant consumer rip-off. 

Most New Hampshire hydropower plants already qualify for net metering under the current 1 MW cap. But some, notably four of the hydro plants Eversource sold to Hull Street Energy last year, generate between 1 and 5 MW. The amended version of HB 365 would allow those facilities to legally reclassify themselves as net-metered generators after they fulfill their existing wholesale contracts. 

Once these hydro plants are reclassified, utilities by law would have to pay them at the default energy rate rather than the wholesale rate. The default rate — about 9 cents per kilowatt hour (kWh) — is roughly twice the wholesale rate — about 4 cents per kWh. Consumers would be forced by their own elected representatives to pay twice the wholesale price for hydropower generated by existing hydro plants. 

The New England Ratepayers Association estimates that the subsidies in this bill will cost consumers about $10 million a year. But legislators have still another plan to compound the subsidy. 

Senate Bill 124 increases the state’s Renewable Portfolio Standards. The bill would mandate that 18.9 percent of New Hampshire’s power come from new solar generation by 2040. That’s up from 0.5 percent this year. 

The double whammy, then, would work like this: The state by law forces utilities to pay twice the wholesale rate for net-metered solar power, then compels utilities to buy 38 times more solar power. 

Just like that, legislators would create a huge transfer of wealth from Granite State residents and businesses to a politically favored industry. 

Legislators considering these bills should take note of a study published this week by the Energy Policy Institute at the University of Chicago. It concludes that Renewable Portfolio Standards increase the cost of electricity far beyond the benefit of the carbon reductions they cause. The “cost per metric ton of CO2 abated exceeds $130 in all specifications and ranges up to $460, making it at least several times larger than conventional estimates of the social cost of carbon,” the study concluded.

With a retail electricity rate 60% higher than the national average, New Hampshire should be doing all it can to lower electricity rates. Instead, legislators continue pushing laws designed to raise rates even further.  

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Do Granite Staters really want mandatory paid leave?

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House Democrats insisted on incorporating a mandatory paid leave program — and its $168 million wage tax — into the state budget, knowing that this could trigger a veto by Gov. Chris Sununu. It’s a strange hill upon which to die, considering that there’s no evidence Granite Staters are demanding this specific workplace perk. 

This month the UNH Carsey Center for Public Policy released a report asserting that Granite Staters support guaranteed job protection for paid family and medical leave programs and a 60 percent wage rate while on leave. 

This is about as useful to lawmakers as a ping pong table is to the Night’s Watch. It’s nice to have, but when the real work starts its minimal utility quickly becomes apparent.  

Nowhere did the survey ask whether respondents would prefer paid leave to other benefits such as flexible schedules, more health coverage or higher pay. Nowhere did it ask whether employees would prefer paid leave if it led to lower pay raises or reduced benefits in the future. Nowhere did it ask how much employees would be willing to pay for such a benefit. 

The 2016 UNH poll that purported to show broad support for paid family leave in New Hampshire also left out crucial questions. It did not give respondents the option of choosing from a list of other possible workplace benefits. The only cost it included was $5 per week, which is on the low end of the cost scale for various paid leave programs.

Other polls have asked such questions, and their results do not support the theory that paid leave is so critically important for employees that the state must guarantee it via a mandate and wage tax.

  • A 2017 Pew poll found paid leave statistically tied with more flexible work schedules as the most preferred new benefit, with 28 percent preferring schedule flexibility and 27 percent preferring paid leave. (That poll also found, by the way, that most Americans were satisfied with their workplace benefits and thought their employers cared about them and their well-being.) 
  • A 2017 study by data research firm FRACTL found that employees ranked paid parental leave 8th among a list of 17 benefit options. More popular were better health benefits, more flexible hours, more vacation time, work from home options, unlimited vacation, student loan assistance and tuition assistance.
  • A 2017 survey by payroll and benefits firm JustWorks found that flexible schedules and remote work options were far more popular among employees than unlimited paid time off or parental leave. Fewer than half of employees said unlimited paid time off or paid parental leave were important. 
  • A Cato Institute poll last December found that support for paid leave crashes when people are given the option of considering the costs. In the abstract, 74 percent of Americans support paid leave. But 60 percent oppose paid leave if it would lead to lower future pay raises. 

Paid leave is being pushed on Granite Staters as if it is universally acknowledged as the holy grail of workplace benefits. It isn’t. National polling shows that most employees prefer other benefits to paid leave. And even if it were the most popular benefit, that wouldn’t make it the right benefit for every employee or every employer. 

When employers are forced to offer this particular benefit over all others, employees are then forced to accept this particular benefit instead of others employers might have chosen. There is no compelling case for forcing this choice on all New Hampshire employees. Creating a budget showdown over an entirely unwarranted mandatory benefit would only compound the mistake.  

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Needless solar subsidies in HB 365 would push up electricity rates

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House Bill 365, scheduled for a Thursday vote in the state Senate, would require utility companies to pay above-market rates for solar power, thus forcing consumers to pay higher costs than necessary for electricity, the Josiah Bartlett Center for Public Policy cautions in a statement released today.
Such anti-consumer subsidies for a specific industry are not necessary for New Hampshire to encourage the development of alternative energy production. Solar technologies are approaching cost parity with more traditional forms of energy production and are increasingly able to compete without subsidies.
For example, Connecticut announced in December that it had entered into contracts with nine solar energy providers (including two based in New Hampshire) for an average cost of 4.9 cents per kilowatt hour (kWh), “which is approaching parity with the market price of energy,” the state’s Department of Energy & Environmental Protection pointed out.
HB 365 ignores this trend and would force utilities to buy net-metered solar energy at the default energy rate, which is about 9 cents per kWh. That is more than double the market price of about 4 cents per kWh.
Why would New Hampshire force its own citizens to pay more for solar power than the state of Connecticut is willing to pay?
This forced subsidy runs against the bill’s opening statement, which declares that “New Hampshire’s electricity consumers, including municipalities, manufacturers, commercial businesses, and other large users, strongly support more competitive retail options to lower their energy costs.”
Rather than encouraging alternative energy production that would compete on price, thus lowering energy costs, HB 365 would push prices higher by compelling consumers to buy solar power at above-market rates.
HB 365 represents a wealth transfer from all electricity consumers to net-metered solar energy producers. New Hampshire’s electricity rates are already among the highest in the nation. This bill would make the situation worse, not better — at a time when solar costs are falling and the case for subsidies is falling along with them.
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Concord’s expanding black hole

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Scientists on Wednesday revealed what they claimed was the first ever photograph taken of a black hole. But this can’t be true because people have been taking pictures of government since the dawn of photography. 

This early photo of the U.S. Capitol was taken in 1846, 70 years before black holes were characterized and 125 years before the first one was discovered.

Black holes famously consume everything within their reach. Government demonstrates a similar appetite.  

Humanity fears the unstoppable power of the black hole. Anything that encounters a black hole is pulled into a dark abyss from which not even light can escape. Slip within one’s reach and doom is certain.

Thankfully, government can only aspire to such inescapable domination. As a creation of man, government can be controlled. But that can be done only by suppressing its natural tendency to expand and consume. 

We do that first by dividing and balancing its power. In this way we turn its power against itself. But that is not enough. We must also control ourselves.

Government will constantly expand as long as we fail to guard against the natural human temptation to increase our own status and authority by enlarging the ravenous, massive force we have created to serve us.   

Resisting this temptation is difficult. Think of all the good a more powerful government might do if only it could be kept in “the right” hands. Giving in to that temptation causes government power to expand, which necessarily causes the power of the governed to shrink. 

It is as The Simpsons explained about black holes in Season 24. 

Sadly, too few people in power take seriously the wisdom passed down by the Founding Fathers — or The Simpsons. 

The day after the release of the black hole photo, the N.H. House of Representatives passed a budget that increases state baseline spending by $382 million and raises taxes and fees by $417 million, as we explained in a report just after news of the black hole photo broke. These are not small, incremental changes. The spending figure is a 14.8 percent increase over fiscal year 2018. 

The House budget aggressively expands the size and power of state government. It’s important to recognize that the House’s disagreement with Governor Chris Sununu is not primarily about services provided. It is about power. 

The best example of this dynamic is the House’s immediate rejection of the governor’s compromise on paid family and medical leave. In the governor’s proposal, that service — a priority of the House majority — could be provided by the private sector through voluntary transactions. There would be no coercion, no tax, no government expansion. The House instantly rejected this option in favor of a mandate, a tax, and an expansion of governmental power. 

The surplus offers another example. The governor had spent the state’s large budget surplus on items that do not fall within the baseline budget. This was to avoid creating obligations on future budgets — obligations that would drive up taxes and expand the size of government. The House instead rolled it into the regular budget, necessitating tax increases.

In sum, the House budget expands both the size and the reach of state government. It enlarges state power and authority in much the same way a black hole grows — by grabbing things that were not previously under its control and absorbing them. When this is the primary motivation of government, all that is just outside of government’s reach ought to be worried.  

 

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House budget proposes $382 million in new spending, $417 million in new taxes and fees

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A new briefing paper from the Josiah Bartlett Center for Public Policy shows that the House’s 2020-2021 budget proposal spends $382.4 million more in state funds than Gov. Chris Sununu’s proposed budget and includes $417.7 million in new taxes and fees. 

The paper shows that the divergence in governing philosophies between the Republican governor and the Democratic House majority could hardly be more stark. 

Sununu’s budget would increase fiscal year 2021 general fund spending by 5.4 percent over fiscal year 2018. The House budget increases spending over the same time period by 14.8 percent.

The tax increases show an equally sharp philosophical divergence. 

Gov. Sununu’s proposed budget contains one expanded tax (extending the tobacco tax to cover electronic cigarettes) and a new fee (a charge on newly allowed sports betting). The House budget also expands the tobacco tax and includes the sports betting fee but also includes hundreds of millions of dollars in new taxes to cover the budget’s spending increases.

The House budget includes a sales tax on marijuana transactions ($4 million), business tax increases ($94.1 million), a new capital gains tax ($150 million), and a new wage tax (payroll tax) to fund a compulsory paid family and medical leave program ($168.6 million). 

Without those new taxes, the House budget does not balance. In fact, it also doesn’t balance without the surplus built up over the last two years.

Both Gov. Sununu and the House spend the current state budget surplus. But the governor treats the surplus as one-time revenue attributable primarily to the immediate stimulatory effects of the federal Tax Cuts and Jobs Act of 2017. He therefore dedicates the money to one-time appropriations rather than recurring spending. 

By contrast, the House treats the money as ongoing revenue and uses it to increase baseline state appropriations. Spending it this way requires future tax increases to sustain the higher level of spending, something the governor sought to avoid. 

The House budget would turn state taxation and spending sharply upward and put it on a rising trajectory into the foreseeable future.  

(A previous post in this space failed to account for a relocation of lottery revenues in the governor’s budget. That failure inaccurately put the House spending figure $584 million above the governor’s.)

A copy of the full report in pdf form is here: Budget Visions 2020-21-4.

 

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