ACWORTH, N.H. - On a still, cold night last week in this woodsy outpost, the talk at town hall was of revolution. Ten residents had gathered, braving country roads ravaged by frost heaves to consider a radical notion: that New Hampshire should consider implementing new taxes.
Such a move has been dead on arrival for generations in the Granite State, where residents treasure their "Live Free or Die" sensibility and have demanded that leaders take a pledge against new taxes. But a small, vocal group of dissenters says the tide has turned against flinty tradition, and that voters, fed up with fast-rising property taxes and facing a $50 million deficit in the first year of the state's two-year, $10 billion budget, are ready to talk about other options for raising revenue, including a state sales or income tax.
Next month, Town Meeting voters in 88 of New Hampshire's 221 towns will weigh in on a nonbinding resolution that declares the property tax system unjust and calls on legislators to give up their vow against new taxes, as a first step toward crafting a more equitable tax system. The Granite State Fair Tax Co alition, a two-year-old nonprofit group that describes itself as nonpartisan, is crisscrossing the state to promote the measure, which it drafted.
New Hampshire already taxes a variety of goods and services, including cigarettes, meals, and hotel rooms. Attempts to enact more broad-based taxes, such as those on sales or income, have failed in the past. Even if the measure passes, it has no teeth to force change, and Governor John Lynch has already promised to veto any sales or income tax.
But leaders of the new movement say they are patient. They say they have not endorsed any specific new taxes, and don't expect fast change, and simply want to start a statewide conversation about options for funding government.
In New Hampshire, where voters have prized their freedom from taxes, even that modest manifesto has proved inflammatory.
"There has been a sea change in the political climate of New Hampshire, and people who were perfectly happy with the status quo 10 years ago aren't happy today," said Paul Henle, a former real estate agent who is the coalition's full-time director. "Property taxes have gotten so high that people are willing to consider a change, and that's the message we hope this will send to legislators."
Last spring, when the group tried out the article at 14 Town Meetings, 13 approved it.
The chairman of the state Republican Party, Fergus Cullen, has accused the group of "hijacking" the Town Meeting process.
"They're advocating an income tax, but they don't have the courage to say so," said Cullen.
Leaders of the campaign say the state's mood has changed in recent years, as demand for rural properties has increased, driving up real estate prices and boosting taxes. Some towns have struggled to meet the costs of educating students under the state's disputed school funding formula, which has been criticized for disproportionately benefiting property-rich towns.
The debate over taxes is the latest sign of political change in New England's most conservative state, where Democrats currently control both houses of the Legislature, and Lynch, a Democrat, is in his second term. Last year, some conservatives cringed as lawmakers approved a 17 percent state budget increase. Others marveled at the state's adoption of civil unions for same-sex couples.
Adoption of a state income tax would mark a more dramatic shift in the state's fiercely independent identity. New Hampshire is one of nine states with no income tax, according to the IRS.
"It would very much change the character of the state, because more revenue would come in and be spent," said Andrew Smith, a political science professor at the University of New Hampshire. "The current tax structure keeps government small."
According to the Fair Tax Coalition, the state's reliance on property taxes at a time of sharply climbing property values has overburdened poorer residents, whose bills are not scaled to their incomes. Total property taxes collected statewide have increased about 8 percent per year, on average, since 2000, to $2.6 billion, and provide 60 percent of state revenue, more than in any other state, said Henle.
In Acworth, a rural town of 880 near the state's western border, where the town hall sits on a hilltop beside a white church and a snowy town green, residents who sat on narrow wooden benches at the meeting led by Henle said the time for talking about taxes is long overdue. Donna Wentworth, who works at the town's general store, said her customers, especially the older ones, worry about their taxes. Her own bill has more than tripled, from $700 to $2,400, since 1992.
"People are losing their homes," she said. "It's getting pretty scary."
Critics of the plan to revamp the tax system say the way to ease the burden is to rein in spending, not add new taxes. They point to the involvement of Mark Fernald, the coalition's treasurer - who proposed a state income tax when he ran unsuccessfully for governor in 2002 - as proof that the campaign is a veiled attempt to generate backing for an income tax. (The group is not part of the national "fair-tax" movement, championed by GOP presidential hopeful Mike Huckabee, that would replace federal income taxes with a national sales tax.)
"I think the state is on the road to getting an income tax if we don't put the brakes on out-of-control spending," said Mike Biundo, chairman of the New Hampshire Advantage Coalition, which opposes the resolution. "If you give the average citizen an alternative, an income tax or lower spending, they'll pick lower spending every time. [The coalition] is preying on the fact that people think property taxes are too high."
The history of "the pledge," the swearing off of sales or income taxes that became almost a requirement for New Hampshire politicians, dates back to the 1970s, when Republican Governor Meldrim Thomson Jr. signed a written promise not to allow either one, and to "keep the greedy hand of government out of your pocketbook."
Tom Thomson, the son of the late governor, has recently led a statewide campaign against the practice of heavily taxing properties with scenic views. Despite his criticism of the current system, he adamantly opposes any move to new kinds of taxes.
"A broad-based tax won't reduce property taxes - they will use it to build bigger government," said Thomson, an Orford tree farmer. "All you have to do is look to Vermont, Massachusetts, and Maine. They all have sales and income taxes, and their property taxes are as high as New Hampshire's."
Since Governor Thomson's day, most successful candidates have taken the pledge. During a school funding crisis in the late 1990s, legislators moved toward a state income tax, but the proposal died when Democratic Governor Jeanne Shaheen promised to veto it. Colin Manning, a spokesman for the current governor, said Lynch has made it clear he, too, would veto a sales or income tax.
