The fate of New Hampshire's first state-wide income tax, approved by the House of Representatives last Thursday, is up in the air until the state Supreme Court decides this week whether a referendum on the issue is constitutional.
New Hampshire's Congress was pressured to enact legislation after a 1997 state Supreme Court decision that rejected a proposal to fund public schools with local property taxes.
The new law would make education largely state-funded, with a four percent state-wide income tax and a property tax levied on vacation homes.
"It would replace property tax with income tax and tax burdens would rise and fall with incomes," State Senator Clifton Below '78, who co-sponsored the bill with Representative Elizabeth Hager, told the Dartmouth. "It would be a much fairer tax. Some people would pay more, but they would be the people who could afford to pay more."
Most Dartmouth professors The Dartmouth spoke with over the weekend agreed that some type of state-wide tax is necessary to eliminate the disparity that exists between New Hampshire schools as a result of differing local tax bases.
"They have to enact some type of broad based tax," Economics Professor John Menge said. "It's very likely that the senate will pass a version of the bill. Consequently a broad-based tax law will go into effect."
While this may be the case, before this law is passed, there is sure to be a lot of conflict, Menge said.
"Everyone knows that New Hampshire doesn't have income or sales tax," Assistant Professor of Government Constantine Spiliotes said. "Changes aren't going to be taken lightly."
New Hampshire is the only state other than Alaska that does not have an income tax, Below said.
However, he added that once people understand the reasons necessitating the income tax, he thinks they will support it.
Below said it was one of the key planks of his platform when he ran for the state senate, and he won the election by a 1001 vote margin even though he ran in a district that had never elected a Democrat before.
Currently, the bill is heading towards the state senate, where most people agree it will be approved.
The largest obstacle facing the fledgling income tax law is the opposition of Governor Jeanne Shaheen, who will risk losing the support of Manchester's influential and conservative newspaper.
"Since almost 30 years ago, the Manchester Union Leader has mandated that the governor veto any new broad based tax," Menge said. "She is afraid if she does renege on her pledge, she will not have success in running for any office in the future."
"I think she will veto it," Menge predicted. "The probabilities are close to 100 percent."
Shaheen said she would veto the bill unless it is approved by a state-wide referendum, Below said.
The state's Supreme Court has been asked for an advisory opinion concerning whether or not a state-wide referendum is constitutional.
"What's really in doubt right now is really is whether a referendum is constitutionally possible, Menge said.
"The chance of there being a referendum is less than 50 - 50," he continued.
"Some of us believe that taxation is a well founded reason," Below said. "We're waiting for an opinion from the Supreme Court."
Shaheen plans to release her own plan on Wednesday, Below said.
Her plan will call for a state-wide property tax, a cigarette tax and a tax on gambling at horse tracks, Menge said.
Government Professor Richard Winters said the real question at hand is whether there is more support for the Hager-Below bill or the tax increases that Shaheen will propose on Wednesday.
Winters said he thinks the governor hopes there will be strong support for her plan of "taxing the other fellow."
However, according to Menge, the chances of the legislature approving her bill are very low.
If Shaheen does veto the income tax, "chaos" will result, Below said, because he doubts that the legislature will support any tax plan other than the one that he and Representative Hager sponsored.
The final New Hampshire tax laws, once all of the political opposition is ironed out, will probably resemble the Hager-Below bill, Menge said.
