Friday, April 24, 2009


The American Legislative Exchange Council (ALEC) has just released its 2009 “Rich States Poor States” report ranking the economic potential of all the states. New Hampshire, flying high in 2007, has received a flunking grade. In just two short years from having elected a new legislative majority, New Hampshire has fallen from a ranking of #20 nationally to a ranking of #37 today. In other words, New Hampshire’s has fallen seventeen positions in rank in relation to all other states and is now just thirteen places from the bottom of the list.

The report’s authors, Arthur Laffer, Stephen Moore and Jonathan Williams, periodically evaluate all states on the basis of their tax rates, tax burden, recently legislated tax changes, debt service, public employees per 10,000 of population, state liability system, state minimum wage, worker’s compensation costs, right to work, and tax expenditure limits.

The report’s purpose is to identify which states are engines for economic growth, economic improvement and job creation and which states are not. States that promote regulation and tax schemes that discourage capital growth and investment in new businesses and jobs fall toward the bottom of the rankings. Presently, the five top performing states are Utah (#1), Colorado (#2), Arizona (#3), Virginia (#4), and South Dakota (#5). The five worst performing states are New Jersey (#46), Maine (#47), Rhode Island (#48), Vermont (#49) and, New York (#50).

This importance of ranking New Hampshire’s economic potential may be lost on individuals employed by government, higher education or institutions providing health care but for those not dependent upon these entities for either employment or for business development, a precipitous decline in New Hampshire’s national ranking means poorer prospects for future business development, lower future wages, less opportunity for advancement, poorer prospects for the sale of homes and other real estate and poorer prospects for creating a satisfactory retirement income. New Hampshire’s lessened status will simply cause investors to look elsewhere.

Legislatures wanting to promote long term growth and prosperity for their states do so by promoting less government, less regulation and a favorable tax climate for individuals and for businesses. Until recently, New Hampshire thrived on this approach to government. By reversing the state’s historic preference for low taxes and less government, New Hampshire’s legislature has now begun to drive investors away. Google “Rich States Poor States.” Check out New Hampshire. For the first time in decades, New Hampshire has begun to lose population.

In 2007, New Hampshire lead all northeastern states in terms of economic growth and prosperity. It was then the northeast’s economic powerhouse. The glory of that era has now dissipated. Today, New Hampshire’s ranks behind Massachusetts, #26, and behind Connecticut, #32, as a desirable place to invest, to build a business and to create jobs. In addition, New Hampshire is performing worse than average in gross state product growth, in personal income growth, and in personal income per-capita growth.

The calamity of New Hampshire’s steep decline in national and regional economic prestige over such a compressed period of time is entirely due to its legislature’s enactment of toxic regulatory, tax, and spending initiatives. In 2007, New Hampshire’s governor and legislature increased state spending by more than 17% over the previous biennium and increased more than twenty taxes and fees to pay for growth in government. Calculations and projections by the majority were inept however and instead of covering costs, the legislature caused New Hampshire’s deficit to balloon hundreds of millions of dollars out of control.

Oblivious to the damage wreaked upon the state’s economy by ill advised past policies, the New Hampshire House recently passed an 8% tax on estates larger than $2 million, passed a 5% capital gains tax and voted to increase existing taxes on dining out, on renting hotel rooms, on cigarettes and on gambling winnings.

Following these votes a Manchester Democrat publicly dismissed the idea that new tax and spending increases would cause anyone to move away from “such a beautiful state.” A prosperous attorney friend of mine in Manchester, who actively invests and advises other investors on the implications of tax policy, told me at lunch the other day, that because New Hampshire’s new political regime has chosen to penalize risk taking and success, he and his wife are now seeking to establish a new domicile in Wyoming. Wyoming is #6 on ALEC’s list.

Paul Mirski
POB 190
Enfield Center, NH 03749

603 632 5555

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