Local Tax Caps in New Hampshire

The Union Leader has written about the State Supreme Court’s ruling striking down Manchester’s tax cap–see here and here.  While opponents of tax caps see this as vindication of their viewpoint, it is only a technical one.  The UL states:

In a unanimous opinion, the court ruled Wednesday that the cap, passed as an amendment to the city charter, goes against state law that lays out details of how a city with a mayor and board of aldermen should operate.

While the amendment requires a two-thirds vote to override the cap, state law says budgets should pass on a simple majority vote, the court said.

“The proposed charter amendment is inconsistent with state law. Because the amendment constrains the board to either abide by the spending cap or act by a two-thirds majority to override it, it conflicts with the board’s authority to adopt a budget,” the court ruled in an opinion written by Associate Justice Gary Hicks.

OK, so it seems the problem here is the state law.  That is a much lower bar to jump over than, say, a Constitutional problem.  Clearly, the state law has to be changed.  It simply does not make any sense, from a public policy perspective, to limit the ability of towns to enact a tax cap–especially in New Hampshire where many folks take pride in their large degree of local self-governance.

From an economic perspective, tax caps are also good public policy.  In this study (pdf) that I co-authored with Dr. Barry Poulson (the country’s leading expert on tax and spending limits), a tax cap is good for both the private and public sector as shown by Colorado’s experience with their own tax cap called the Taxpayer Bill of Rights.  Put simply, a growing private sector creates more revenue for the public sector–a win/win.