New Hampshire is well-known for its lack of broad-based taxes and its relatively low levels of public spending. Policymakers in neighboring New England states often point to New Hampshire as a model without a clear understanding of exactly how New Hampshire "does it" —that is, how the state is able to maintain its unique fiscal approach. A new study by the Boston Fed's New England Public Policy Center seeks to clarify debate by analyzing the Granite State's spending and revenues relative to those of other New England states.
The report finds that New Hampshire is able to "do it," in part, because the state faces favorable circumstances such as a low poverty rate, which lower the need for spending. The report also finds that the Granite State has made policy choices to help keep spending low and avoid broad-based taxes. Some of these choices may be infeasible for other states to replicate in the current environment or inappropriate in states with different preferences for public services.
"We hope the analysis provided in this study gives New England leaders new insights into their individual budget considerations," says Yolanda Kodrzycki, Director of the New England Public Policy Center at the Federal Reserve Bank of Boston and a Vice President at the Bank. "This study is a non-partisan, independent perspective for policymakers throughout the region."
To answer other states' lingering questions, legislatures and governors seeking a quick fix to their problems should probably keep looking. Jennifer Weiner, Senior Policy Analyst and principal author, observes that "there is no silver bullet – but rather that there are some impediments to replicating New Hampshire's approach."
The study does not advocate for a particular fiscal model. However, by illuminating how and why New Hampshire differs from its neighbors, it aims to inform policymakers' discussions in states across the region as they grapple with how to provide—and pay for—services in fiscally challenging times.
The complete report, "How Does New Hampshire Do It? An Analysis of Spending and Revenues in the Absence of a Broad-based Income or Sales Tax," is available on the Boston Fed's website at http://www.bos.frb.org/economic/neppc/index.htm.