How Does New Hampshire Do It? An Analysis of Spending and Revenues in the Absence of a Broad-based Income or Sales Tax
This report seeks to understand how New Hampshire has avoided a broad-based income or sales tax by examining the factors that drive the state's lower-than-average per capita spending and the revenue sources the state relies on to pay for that spending in lieu of an income or sales tax. It presents comparative data for the six New England states and discusses some of the impediments faced by other states in the region interested in emulating New Hampshire's fiscal model.
The author finds that New Hampshire's below-average spending is due to a combination of policy choices and favorable circumstances that the state faces, such as a relatively low poverty rate. States with needier populations or higher input costs may need to spend more than New Hampshire does to provide a given level of services. On the revenue side, New Hampshire state and local governments collectively rely more heavily on property taxes than any other New England state. However, the state government's revenue system is more diverse than those of its regional counterparts and possesses several unique features, such as the business enterprise tax.
This report 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' discussion in states across the region and nation as they grapple with how to provide services in fiscally challenging times.