A letter from America

A letter from America

by Ben McConville • 10/11/03

"LIVE free or die" is the motto of New Hampshire. Its reputation as a truly conservative state is based not only on its ability to make or break a presidential candidate, but also its low tax regime. Such is its lack of state intervention that New Hampshire has become a beacon for libertarians who hope to transform it into a utopian ideal of limited government, few laws and individual liberty.

More than 5,000 libertarians have pledged to move into the state (population 1,235,786) after conducting a national poll to see which part of the US best fits their free-wheeling ideals. Ultimately, they aim to increase their numbers to 20,000 within two years and turn the state into a national model.

In other words, to restore their version of the American Dream.

The Jeffersonian philosophy that animates the group's work combines an appreciation for entrepreneurship, the market process and lower taxes, with strict respect for civil liberties and scepticism about the benefits of both the welfare state and foreign military adventurism.

New Hampshire beat nine other finalists for the Free State Project. Wyoming was runner-up, but ten percentage points behind New Hampshire in balloting conducted by about 5,000 members of the project around the US.

Elizabeth McKinstry, of Ann Arbor, Michigan, the Project vice-president, said New Hampshire won because it boasts the lowest state and local tax burden in the continental US and the leanest state government in the country. It has a citizen legislature, a healthy job market and, perhaps most important, local support for the movement.

Project members also like the state's constitution, which protects the rights to revolution and secession from the United States. Some free-staters want to roll back restrictions on gambling and legalise medicinal cannabis. As a result, the prospective new neighbours worry some New Hampshire residents. Kathy Sullivan, state Democratic Party chairwoman, said project members can best be described as anarchists.

New Hampshire does not have a general sales tax, which is 6 per cent in most states, or an income tax on an individual's reported wages, up to 22 per cent in some states. New Hampshire, long a haven for Wall Street's super-rich and Washington's finest, is one of the wealthiest in the US. Consumption is high and business is booming, due to the low taxes: there are taxes on an individual's interest and dividends income, inheritance at 18 per cent (compared with 40 per cent in the UK), and business taxes at 8.5 per cent (compared with 19 per cent corporation tax in the UK).

But is New Hampshire the libertarian paradise it is cracked up to be? In 1996, welfare reform came into place. Among the tightening of the rules was the limiting of family welfare benefits to five years.

Nevertheless, according to the Cato Institute, a libertarian think-tank, New Hampshire is still in the top 12 states for paying welfare benefits per capita. It works out at $10.96 per non-working hour, compared with $17.50 in Hawaii, the highest, and $5.53 in Mississippi, the lowest.

In other words, New Hampshire still has a bit of Scandinavian social democracy about it.

In the land of low taxes, who is paying for welfare benefit? According to a study by the Institute on Taxation and Economic Policy, a non-profit independent policy body, low and middle-income families in New Hampshire pay a higher proportionate share of their income in state and local taxes than do the richest.

When all New Hampshire taxes are totalled up (including local property taxes), the study found the tax rate on the wealthiest 1 per cent of families, with average incomes of more than $1 million, is 1.9 per cent. But the relative tax rate (income and property) on the poorest families, those earning less than $20,000, is higher. At 8.1 per cent, it is more than four times the effective rate of the wealthiest taxpayers (though, at the equivalent of ?20 a week, still small by UK standards). Besides, since there is no New Hampshire VAT, poorer families pay much less in consumer taxes than in Britain.

No wonder New Hampshire attracts people. When the libertarians get there, they will find others had the same idea: the population grew 11 per cent in the past decade. How long before New Hampshire demands a seat at the UN?

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