Posted tagged ‘revenues’

Can We Be Different Like Everyone Else?

January 4, 2013

I was surprised to see the number of states that have allowed casino gambling.  In a prior post I focused on what I thought were the states that are perhaps most identified with casino gambling (Nevada, New Jersey, and Connecticut).  Twenty three (23) states and five since 2005 (if you count Massachusetts) now allow some type of casino gambling.  As the map below shows, the Northeast region of the country is the king of casinos.  I don’t know what that says about the Northeast but Vermont and New Hampshire are now the only states in the region that do not have some form of casino gambling. (a note about the data in the charts below:  I have taken reasonable steps in the limited time I allocate to this blog to provide accurate information – if anything appears inaccurate please let me know).

Note: Map is Updated thanks Curtis!

 Competitive Casino Map

I think whether or not to become more like other states in the region is an important and ongoing debate in New Hampshire, whether it be about our revenue structure, which stands out in the region, or our political, legislative, and regulatory structures which to a lesser degree do as well.  I’ve long argued that the state was able to buck the region’s unfavorable demographic and  economic trends because it was somewhat unique in the region.  Some who disagree with me on that argue that the state should, in the case of casino gambling, refuse to become more like the rest of the Northeast region.  While others who agree with me on the benefits of NH’s uniqueness are arguing that NH should have casino gambling because other states in the region are doing it.  Consistency isn’t what it used to be or perhaps I just confuse consistency with rigidity.  It is also possible that I am misreading the whole consistency and change aspect of the debate.  Could it be that gambling is consistent with NH’s fiscal traditions but inconsistent with its uniqueness in the region?  I don’t expect there will be a lot of testimony on that at any public hearings on casino proposals.  For those more interested in the pedestrian issue of how much state revenue we can expect, below is a chart that shows how much states currently take in from casinos (in very broad categories).  Interesting to see that Pennsylvania is now the champion in terms of state revenues from casinos.  That state is, in large part, responsible for the decline in revenues in New Jersey.  Things are definitely changing in NH and the upcoming debates over whether or not to allow casino gambling will, I think, tell us a lot about the direction of that change.

State Revenue from Casinos

Will NH’s Fiscal System Get Better Looking Each Year?

November 9, 2012

Up close everyone sees the wrinkles, greys and infirmities that come with age,  but some things do, in fact,  get better looking with age.  Surprisingly,  NH’s revenue structure  may be one of them.  For a lot of people New Hampshire’s fiscal system has been out of balance for a long time.  I see it somewhat differently.  The state was able to maintain a fiscal structure that was unlike any other in the country.  Some hate it, some like, but one thing it absolutely most depends on is balance.  Specifically, those identifying with the left of the political spectrum had to be satisfied with doing the things that state government has to do and only a limited amount of what it may want to do.  While those on  the right of the political spectrum had to be willing to occasionally adjust the tax price of services (adjust rates and fees etc. temporarily or in some cases permanently).  Without a recognition of the need for balance from either side, the pressures from one side that were met with complete inelasticity from the other could cause the system to burst.   If NH has lost some of that balance I hope it regains it quickly because while some may see our system as flawed, it has also been a big part of our successes.

Looking toward the future, our current system is likely to suffer less from some of the demographically and economically induced changes in the growth in state-level revenues.  I don’t know if we will be the envy of other states but we should consider the impacts of the changes before walking too far down the path of big changes.  The biggest change is the fact that growth in the working age population is slowing and may continue to do so for decades (see below for NH).

That, of course, implies slower growth in wage and salary income and states most reliant on income taxes will feel that pinch the most.  On the flip side, with more older citizens, likely more income will be in the form of interest and dividends, a benefit for NH’s current system if interest and dividends tax revenue grows proportionately .  NH’s business enterprise tax (BET) depends on wage and salary payments so that revenue source would be negatively affected but because of the way the BET interacts with the business profits tax(BPT), a decline in either source is cushioned by impacts to the other source.  Moreover, as labor becomes more scare, the capital intensity of businesses should increase as businesses look to produce more with fewer people.  While the BPT impacts will be mostly neutral, it is possible that a deepening of capital in the economy could  increase in the relative profitability of businesses which would provide more lift to the BPT.

As the age structure of the population changes to include more older residents, in the aggregate, less money will be spent on the types of things subject to general sales taxes and more on goods and services that are not taxed (health care being the most notable), thus sales tax revenue growth rates could slow.  Combined with more sales occurring digitally via the internet and the generally increasing geographical separation of  buyers from the location of sellers, this does not bode well for long-term growth in sales taxes.  NH’s hybrid mix of taxes and fees collectively are likely to suffer less as a result of demographically induced changes in revenue .  As the risk of impacts is spread over a greater number of sources, any negative impacts on one source will have less of an effect than if the state relied on either of the two major sources of most other state’s revenue, the income and general sales tax.  For the most part, property taxes will also be relatively less affected by demographically induced changes.

It may not look like it now, but with the kind of balance that characterized fiscal policy making in NH for decades, and with coming shifts in revenue growth resulting from demographic and economic changes, NH’s fiscal structure  may well be better positioned to avoid the next (and inevitable)  fiscal calamity to hit states.


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