That’s not just a headline, it’s the title of a report done in 2011 by the Federal Reserve Bank of Boston.

While the data is a little dated, the report is as relevant today as it was two years ago.

Gov. Paul LePage’s stated goal for a second term would be to eliminate Maine’s income tax, while the Maine Heritage Policy Center recently rolled out a proposal to eliminate both the income and sales taxes, starting with Maine’s most impoverished county.

As the federal report concluded, New Hampshire claims to have no income tax but actually has one, while it substitutes a statewide property tax for 16 percent of government revenue.

To fully emulate New Hampshire, employers would have to accept a .075 percent tax on all wages in addition to interest and income, whether they made a profit or not.

Meanwhile, homeowners would have to accept a statewide property tax.

Plus we would have to slash aid given to everyone from poor people to college students and eliminate pre-K education.

Shortly after the Federal Reserve Bank report appeared, a New Hampshire newspaper, the Concord Monitor, analyzed the results in the following editorial:

New Hampshire way can’t be copied 

Monitor staff

Monday, April 18, 2011

How does New Hampshire do it, other states ask. How does New Hampshire get along with no broad-based sales or income tax? Can they do it too?

The Federal Reserve Bank of Boston’s public policy center took a look at that question and gave its answer earlier this month. It’s “No.” Not unless that state also has relatively few poor people who, as a matter of public policy, are provided only limited social services.

The study found that New Hampshire relies more heavily on property taxes to fund government and educate children than almost any other state. It is a champ when it comes to taking advantage of loopholes in the law to milk the federal Medicaid system, using money meant to provide health care for the poor to pay its bills.

The state’s reliance on alcohol and tobacco sales, while not admirable, is profitable. Those factors, the relative paucity of poor people, and limited access to social services allow the state to collect 22 percent less than the New England average to fund government.

New Hampshire doesn’t spend less because it uses money so efficiently, however. In fact, the Pew Center for the States gave New Hampshire a D-plus in that category, the lowest grade of any state. But New Hampshire does spend less per capita than almost all other states in two key areas: public education and welfare.

New Hampshire caps Medicaid eligibility at 56 percent of the federal poverty level, which makes qualifying for assistance two or three times harder than in other New England states.

(In January of 2013, it was 38 percent of FPL in New Hampshire and 200 percent in Maine for working adults with dependent children.)

Lower welfare spending alone, the study found, accounts for nearly one-third of the spending gap between New Hampshire and other New England states.

New Hampshire has the lowest poverty rate of any state in the nation. As a result, the state’s need to spend is 40 percent lower than the regional average. New Hampshire compounds the advantage of having relatively few poor people by making it harder than other New England states to qualify for Medicaid, the joint state and federal health care program for the poor.

New Hampshire is also the only New England state that does not fund pre-school education. And New Hampshire keeps spending down by paying public employees less than the regional average.

It spends less to support higher education than any other New England state — and as a result its in-state students pay the highest tuition of any in the land. And New Hampshire kept its pension costs down by chronically under-funding the state system.

One of the study’s most timely reminders is that, despite claims to the contrary, New Hampshire does levy a broad-based income tax. No, not the interest and dividends tax, which only affects a small percentage of well-off residents. It does it through the business enterprise tax, a levy based on an employer’s payroll and property value, a tax that must be paid whether or not the company turns a profit. Money that businesses pay in business enterprise taxes is money that can’t be used to pay workers, which makes the levy an indirect income tax on worker earnings.

The Federal Reserve study gives the lie to the oft-heard claims that New Hampshire has a spending problem, and it demonstrates the cruelty of plans to balance the state budget with cuts in funding to social services and education. New Hampshire, in many respects, is already at rock bottom in what it does for citizens in need and higher education. The only place left to go is under the rock.

rrhoades@sunjournal.com

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