New Hampshire Court Bars Voter Input on Income Tax

Published April 1, 1999

The New Hampshire Supreme Court ruled on March 11 that legislators, not voters, must decide on a new tax system to resolve the state’s public school funding crisis . . . a crisis the court itself caused in December 1997, when it deemed unconstitutional the state’s current school funding method.

“Referenda on legislation are unconstitutional in this state,” declared the state court justices in a unanimous advisory opinion on Governor Jeanne Shaheen’s proposal to have voters choose between two options for raising the $900 million in taxes needed to fund schools. Shaheen had hoped to ask voters whether they would prefer imposing an income tax and statewide property tax on themselves, or higher taxes on businesses with the statewide property tax and approval of video gambling. The new taxes would double the state’s overall budget.

“Our challenge is to change the way we fund public education without losing what is special about our state,” said Shaheen in an unprecedented televised address presenting her proposal.

With the court’s rejection of Shaheen’s proposal and a deadline of April 1 fast approaching, lawmakers in the “Live Free or Die” state are stuck with two equally unpalatable options: impose a state income tax, or increase business taxes and expand gambling. If a new funding plan is not in place by April 1, property tax levies cannot be collected after July 1, leaving public schools with no financial support.

The chaos now reigning in New Hampshire derives from a December 1997 ruling by the state’s high court that, contrary to what voters may have imagined, the state’s local property taxes for schools were not local taxes at all but a state tax to fulfill “the State’s duty to provide a constitutionally adequate public education.” Since state taxes are required to be uniform across the state, this finding permitted a 4-3 majority on the court to rail against “disproportionate and unreasonable” school property taxes.

With a strong tradition of local control, almost 90 percent of New Hampshire’s public school costs currently are paid by local property taxes. New Hampshire is one of only two states–Alaska is the other–with no broad-based property tax, income tax, or sales tax.

When the Republican-controlled New Hampshire House of Representatives unexpectedly voted 194-190 on March 4 to approve a 4 percent income tax and a $6 per $1000 valuation statewide property tax, Shaheen, a Democrat, quickly promised to veto the measure. That was before her proposal to have a voter referendum on taxes was rejected by the state supreme court.

“Judges deciding tax policy is simply wrong,” said Grover Norquist, president of Americans for Tax Reform. “This is a school system that enjoyed a better pupil/teacher ratio than 38 states, spent more per pupil than 35 states, and produces some of the country’s brightest students.” New Hampshire ranked fourth in SAT scores in a 1997 survey.

As soon as the state high court issued its ruling in December 1997, Republican State Senator Jim Rubens was concerned that it meant a statewide tax and loss of local control over schools. He proposed a constitutional amendment that would give voters, rather than judges, the final say over how education is to be supported in the state. At the time, Rubens’ proposal garnered the support of only about 20 percent of his colleagues and others he surveyed. With the implications of the court’s decision now better understood, Rubens says support for his amendment have risen to above 50 percent, with endorsements coming in from several business groups.

George A. Clowes is managing editor of School Reform News.