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Publisher's Note: Live by fee
By Jody Reese
“Live by fees or die” ought to be our state motto. We tiptoe around broad-based taxes, such as an income tax, and come up short on the bill to pay for all the things we want our state government to do. Thus, we’re left with fees to finance our government services.
As fees from business, home and car sales and stock sales have declined, state government finds itself cash-strapped and looking to add and raise fees.
Some lawmakers have suggested adding a fee for refinancing home mortgages. This would add thousands to the cost of refinancing. In most cases these extra thousands would be added to the amount the homeowner is refinancing so the fee isn’t paid out of pocket immediately, but over the life of the loan. This is also why lawmakers like the idea. The state gets its money upfront and homeowners pay it back over 30 years.
Regardless of how appealing that is – like free money — it’s a very bad idea and sets a precedent. Taxes, and that’s exactly what this new “fee” is, should occur around taxable events. Something is transacted. But in a refinance, there is no transaction. You’re not selling the home, you’re just adjusting the financing. Imagine, if government took this logic to the extreme and started taxing — sorry. adding a fee — every time you changed credit cards to get a lower rate or a business moved a line of credit from one bank to another for a lower interest rate.
This new refinancing fee is harmful too by making it more expensive for homeowners to lower the cost of their housing. New Hampshire residents already spend too much of their income on housing, including some of the highest property taxes in the nation.
Fees are sometimes justified because lawmakers argue that people can opt out of paying them by not participating in that activity. But that’s an illusion. In fact, fees to register cars, get a license or refinance a home are practically universal. As a result, fees tend to be regressive — that is, they cost the same to everyone regardless of the ability to pay.
An income tax, reasonably low fee structure and marginal property taxes would offer a much more fair taxation system, but it wouldn’t single-handedly solve our revenue issues. It just makes the revenue-raising more fair and less subject to big changes from year to year. For example, as people stopped buying houses, the state saw a steep drop-off in property transfer revenue. An income tax would have kept revenues more stable.
The question of how we raise tax revenue sidesteps the issue of whether we should be raising it; that is, do we really want the services that revenue pays for? That’s a question voters answer every two years by electing their representatives and is almost always confused with how we raise money for government.
Fees tend to be popular because they obfuscate the tax-raising process and thus don’t bring up issues of what we should be spending our state money on.
A more honest form of revenue generation would actually expand the discussion on how much we should be spending. That’s never a bad thing.
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