Despite political pressure, the New Hampshire Senate voted last week to reexamine rather than repeal the statewide property tax that funds state schools.
The Senate's decision came in the wake of a House vote to repeal the tax, which was established in 1999 as a last-minute solution to a budget crisis in which New Hampshire faced the threat of mass teacher lay-offs.
Even if voted down in the Senate, the bill still could have faced a veto by Gov. Jeanne Shaheen, who has said she opposed the original bill because it failed to provide a source of replacement funding for schools.
Had the original bill passed, the current property tax would have ended Jan. 1, 2004, providing more than enough time, its proponents argued, to come up with an alternative source of revenue. They said that the tax, which they claim is not based on the individual's actual ability to pay, is so unfair as to merit an immediate repeal.
The current property tax places the heaviest tax burden on the poorest segment of the state population and hurts retired people who own property but have no annual source of income, Sen. Clifton Below '78 (D-Lebanon) said.
A repeal would also have forced gubernatorial candidates to formulate specific tax plans as part of their election platforms, something local representatives say they are still committed to.
"One thing we'll be trying to do in the upcoming months is pin these candidates down for what they think we should be doing to instead of the property tax," Rep. Sharon Nordgren (D-Hanover) said.
The House and Senate discussed several alternative tax plans, state representatives said, including income and sales taxes to replace the property tax, but since the amended bill set no definite termination date for the current tax, these negotiations have slowed.
Below and all four of Hanover's House representatives voted for the repeal of the bill. Their specific plans for alternative funding differed somewhat, but most advocated an income tax as an integral part of school funding.
An income tax would be the fairest way of raising revenue for schools, Below said, because it would be directly based on how much money people make and their ability to pay.
"In a sense, people would give back to the schools in proportion to how much they benefited from them," he said.
New Hampshire is one of only two states nationwide without a broad-based income or sales tax, Below noted.
Shaheen's press secretary, Pamela Walsh, said the governor proposed a low-rate sales tax which the legislature rejected, but did not like the idea of an income tax, which would have hurt businesses. Walsh called the repeal "a feel-good move on the part of the legislature that wouldn't accomplish anything concrete."
Below said the amended bill is equally ineffective. "This plan to 'study' the property tax doesn't really mean anything -- it's just political cover for people who wanted to vote against the repeal."
New Hamsphire has been struggling to find a satisfactory way of funding schools since a 1997 state Supreme Court decision declared the old method of using local property taxes to fund schools inequitable and unconstitutional.
Rep. Martha Solow (D-Hanover) said that the court's mandate for equitable funding has been rendered meaningless because wealthy towns like Hanover simply supplement the state's funding with their own local property tax, an option less wealthy communities do not have.
The current property tax also transfer finds from wealthy "donor" to poorer "receiver" communities, a system that has created animosity between towns, Rep. Bernard Benn (D-Hanover) said.
A statewide income tax would eliminate such animosity without hurting the schools, supporters of the original bill argued.
"If we have a tax source that is imposed with the same yardstick for every community, that will be fairer," Solow said.
Walsh said Shaheen remains committed to her original promise to support any plan that lowers the property tax, meets commitments to schools and maintains New Hampshire's competitive tax advantage.
