Wednesday, April 11, 2007

Charlie Arlinghaus: House revolution is a threat to fiscal sanity not just balloon freedom

We have been busy unpacking and have not had time to post since April 4th. I will be updating and backdating the BLOG. Most of the posts will be articles related to taxes and schools and editorials that share our point of view.

The following piece appeared in the Union Leader.

Charlie Arlinghaus: House revolution is a threat to fiscal sanity not just balloon freedom

WHEN THE revolution comes, there will be no balloons. The Legislature has acted swiftly and decisively to mete out severe punishment against the lawless scofflaws threatening the foundation of western civilization by releasing balloons. Consider the threat to a free society posed by a random mylar smiley face released and coming down willy nilly wherever it pleases.

Smiley will threaten us no more. The release of a balloon will cost you a cool $250 fine. Speeding in a two-ton motor vehicle is much cheaper at less than half the price, so let me be the first to urge would be smiley face hooligans to abandon their nefarious mylar mayhem and turn instead to fast cars.

Obviously this one ridiculous act of legislative exuberance is hardly representative and will almost certainly be killed by the sensible Senate, but it is something of a metaphor for the efforts of a House of Representatives that is finishing up its initial work and passing it over to the Senate. Like the balloon fine, much of the work of the House is well meaning and passionate but will have to be corrected, toned down, or set aside by the state Senate.

If all its work were just silly things like the balloon fine, we'd enjoy a nice chortle and be on our way. But the revolution has come and it's not balloons that are threatened.

The real mess that the Senate will be forced to clean up is the state's fiscal stability, both on the spending and the revenue side. The House takes the first crack at the budget process and its crack is a doozy that should leave us all reeling.

The governor had proposed the largest budget increase in more than a decade, about 14 percent, much higher than the rate of inflation. The House of Representatives looked upon that as something of an opening bid and decided to ratchet up spending by an additional $178 million above that already high number.

To make matters much worse, the budget House members will adopt today takes $60 million ordinarily paid for in annual revenues and borrows the money instead. By bonding millions in operating costs, the state is doing the equivalent of you using a credit card to make your mortgage payment. For the sake of your own finances, please don't follow this example.

The last four budget years, including budgets by Governors Craig Benson and John Lynch, had been quite frugal to get spending back on track to sustainable levels. In one fell swoop, the exuberant House of Representatives decided to spend every dime available during a boom in business revenues and raise bunches of taxes and fees to boot.

There has been a significant shift in approach on the tax and revenue side of the picture. Traditionally, we assess fees to cover the cost of some basic regulatory efforts. A fee might cover the cost of filing paperwork or processing an application. For the general operations of government we use regular taxes, not inflated fees.

However, in the rush to find more and more revenue to fuel one of the largest spending increases in history, fees are being manipulated to fuel the general budget. One of the more honest bills, raising a permit fee by 50 percent, actually deleted the language beginning "the amount of the fee shall reflect the relative effort necessary for review of the application." That way we can use the fee as a pseudo-tax. For example, we're raising car registration fees another $6 not to cover the cost of registration but as a tax to fund the general operation of government.

The increase in the tobacco tax will cost small businesses in New Hampshire about $140 million in revenue. But instead of worrying about tax policy hurting businesses, the rush for revenue causes a typical legislator to say "I feel bad but we need the money."

Taxes and fees hurt businesses and taxpayers. We limit fees to recovering the cost of the regulation to keep them from being raised every time the state government wants another $178 million. Considering the damage caused by tax policy helps balance the pressure created with the budget process with sensitivity to the needs of the citizens that budget serves.

The revolutionary exuberance of the House needs to be popped like a balloon by a careful and sensible Senate.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.

No comments: