State House Socialism

The Feds aren't hiding in your closet. They are holding up your roof.

Staunch Libertarians and committed members of the Free State movement have long been attracted to New Hampshire for our decentralized politics and "Live Free or Die" mindset.

So it must be stunning to them that somehow the Granite State has emerged to be the most socialist state in the country.


Really. In fact, there are two reasons why the state is more dependent on government subsidy than any other in the country: the recent economic recession and the state's tax structure.

It is estimated that 89 percent of mortgages in the United States for the first half of 2010 were backed by one of three federally backed programs: Fannie Mae, Freddie Mac or Ginnie Mae. Without this backing, experts say housing prices would collapse by an additional 25 percent. However, the federal government isn't just propping up housing prices for you and me - they are also propping up our state's budget.

With no income tax or a sales tax, New Hampshire relies on property taxes. Sure, the state raises money from the business enterprise tax, business profits tax, tobacco tax, rooms and meals tax and others. But collectively these don't even come close to the role property taxes play in paying for essential state services. In 2006 alone property taxes brought in $2.6 billion, representing 60 percent of all state tax revenues. This percentage makes us by far the most property-tax-dependent state in the entire country. By contrast New Jersey ranks second, where property taxes make up 46 percent.

This heavy reliance on property taxes means the state has a deep interest in making sure that property values themselves are stable and strong. That's why jobs and the economy, while worrisome, never were the true economic threat to the state budget. During this latest recession the state's unemployment rate was about half the national rate. While unemployment is never good for the state's economy, without an income tax or sales tax the impact of unemployment on state coffers is more indirect.

What has a direct effect on the state's budget is property value. The higher the property value, the higher the property taxes raised. The collapse of the housing market nationwide threatened how we paid for essential government services. The pullback on mortgage lending among banks sustained the threat. But the federal government has played a larger role in backing these mortgages. Without their involvement there would be even fewer homebuyers and home prices would fall - as would property taxes.

As much as state leaders would hate to admit it, the federal government, by propping up home prices, is propping up the Granite State.

The presidential primary season has begun again. Our friends in Iowa will surely ask potential presidential candidates about their support of federal subsidies for farm goods, including the corn fuel additive ethanol. Maybe even our new hands-off Free State neighbors will find themselves pressing candidates to support another subsidy: our homes. NH

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