Kathryn Forry is running to the far left of Governor John Lynch on almost every issue.   On the fiscal side she wants to replace the current property tax funding system with a broad based tax, but so far no democrat has every won the governorship running openly on a broad based tax platform.  Forry has other issues that would probably make her an unlikely victor in New Hampshire against almost anyone who chose to run against her but this primary offers an opportunity for observers on all sides to see how much attention she gets given her policy positions.

The results of a Lynch/Forry primary should provide some much needed insights into just how far to the left some NH Dems are willing to go, and if their policy preferences will remain in the closet or if they’ll have an even bigger coming out party than they have over the past two years.  With that in mind I think it behooves us to take a look at some of the potential advantages of the current property tax system Forry decries, and what I believe are some of the disadvantages of either abandoning or diluting it with other forms of revenue.

The people who actually own the land that is New Hampshire, of which there is a fixed quantity, are in the best position to limit the size and scope of government through a conscientious monitoring of the property taxes they are being asked to pay.  The value of land is subject to standard market forces, but can also be improved by the owner, by their own choice, to increase its taxable value.  In both cases the property owner may be subject to higher taxes, but with the added benefit of a potential higher resale value because of the market, or as a result of their own free will.  As the tax increases, the property owner is more inclined to protect his investment from excessive levels of taxation that could devalue his investment.  He will likely take a greater concern in how his money is spent, to ensure that the state or local government is not elevating the tax rate on property unreasonably for purposes property owners may deem irrelevant to their interests or the interests of their state. (Yes, it is their state.)

The representatives of the state in turn have a greater motivation to invest more of the tax dollars they collect on projects that make the property within the state more attractive.  By focusing on only necessary infrastructure and improvements they can optimize their future property tax revenue while benefiting property owners. This can attract business and industry which provides more choices among residents for employment opportunity and income mobility.  And this relationship puts the State in a position to value the input of voters on spending and taxation, and to attract representatives who share those same interests.  

So by making all parties accountable to the value of real property, and limiting the amount of taxes a government may collect by restricting it to that value of that property, government is forced to act almost solely for the betterment of the people who literally own the state and control a significant portion of the revenue the state needs.  Any series of government actions which waste money unnecessarily, decrease property values, detract from shared advantages, make the product or services of New Hampshire businesses less competitive, or that dissuades employees from working or living here, would (or at least should) result in a prompt change in government to one that that favors the policies which tax payers feel benefit their best interests. 

So the property tax method—excluding it’s dilution by other forms of taxation (discussed below) is more inclined toward a smaller more effective government.  It restricts government’s ability to over-tax.  It forces quality and efficiency methods into government instead of favoring over-spending that must then be re-cooped through new taxes.  And it ultimately makes the government the slave of the people, rather than the other way around.

(Yes, yes, there will always be other forms of taxation, but for this exercise we are focusing on the idea that abandoning property taxation as a primary method of collection if somehow beneficial to taxpayers.)

I believe that removing this check, and replacing it (or diluting it) with income and/or consumption taxes, creates additional avenues for income into every level of government that cripple this relationship and systematically remove necessary layers of fiscal accountability to the taxpayers.

When income sources broaden, with different collections from payroll income, property, accumulated wealth, other assets, commerce, transactions, services, fees, and so on, the revenue stream becomes more difficult to observe and restrict.  Politicians at different levels can propose minor increases in so many different places, affecting so many different people, (perhaps even at different times) that there is an increasing loss of transparency.  This can lead to an entitlement mentality that results, more or less, in the almost limitless opportunity for expanding government spending; spending whose outputs are now open to influence by external forces that lack the more tangible fixed commitment of real property owners in the state. 

Tax revenues are no longer as predictable from income or consumption taxes as they are with fixed assets with less volatile value fluctuations as property, so when tax receipts fail to meet spending, as is often the case–because the spending habit begins to anticipate (as in require) unrealistic revenue estimates in advance of actual receipts–new or more creative avenues of resolution (as in more taxes) become necessary to close these holes. (Government never downsizes itself without proper motivation from taxpayers)

Government loses its intimate relationship with its revenue stream, and as such sees little need to limit it’s investment of tax income into issues and policies to benefit the State and property owners in a specific or measurable way.  When there is a few extra million from a dozen different places, coming from a $5 increase in title fees, a new $7 tax on the monthly phone bill, a $10 dollar increase in inspection fees, a $1 increase in tolls, a 1 % increase to this tax as a special funding measure, or to pay off that bond —ad infinitum, who can make the case that government is overtaxing any specific revenue stream to the detriment of those paying the taxes, when it presents such a small portion of the overall abuse?  Government makes for itself this all you can eat tax buffet, wheredenying it a brownie or two will only force it to eat more sorbet.  This is the kind of government that can expand at will, absorbing any surplus cash into its new infrastructure, until it is almost impossible to do more than slow the process down.

Allocation relationships become so complex and so diluted to the taxpayer that spending accountability can only be revealed by lengthy and complex reports, accountants, lawyers,experts, or bureaucrats, all of whom now have a vested interest in maintaining the influx of money on which they feed from their benefactors in state and local government.  The larger the government gets the more disconnected it becomes from its source–the people.  Government continues to expand outside the interests of those with the most to lose–people who own assets within the state, and turns every taxpayer into the financial equivalent of that battery in the movie The Matrix; we are nothing more than a fiscal power source for government spending.

 I honestly believe that deep down, democrats want to vote for Katy Forry because she represents everything they value in government.  Top down control, and a broad tax structure to fund every conceivable ill.  That doesn’t make them bad people, it just means they are willing to sacrifice my idea of liberty simply so they can have more government.  To be honest, I’d rather they just moved to Canada, but since they probably wont, we’ll just have to make a stand right here.