Why are Massachusetts and New Hampshire so different?
Massachusetts is known as the most liberal state in the union. It produced Michael Dukakis, Ted Kennedy, and John Kerry. If you ask my dad, it’s because Massachusetts is filled with moonbats. In other words, it’s got a very liberal culture. New Hampshire, on the other hand, is known as the most libertarian state in the union. The Free State Project is targeting New Hampshire based on its relatively small tax burden and a “culture of individual responsibility.” There is a lot of fear that as an increasing number of Massachusetts residents move north, they will change the culture of New Hampshire and it will become more politically liberal like Massachusetts. Using culture to explain the political differences between Massachusetts and New Hampshire is popular, but does it really stand up to scrutiny? Massachusetts has a history of electing Republicans to the corner office while the recent election of Republican Scott Brown has caused many people to rethink their perception of Massachusetts of extremely liberal. New Hampshire is not dominated by either party.
Culture may be an important factor, but I don’t think that it is the primary factor. If we channel Monica Prasad for a moment, some obvious factors comes to mind.
The first is tax structure. What kind of taxes do we see in MA and NH? Massachusetts (or “Taxachusetts”) relies primarily on broad-based regressive taxes, such as a personal income tax and a sales tax, which spread the burden over a wide section of society. Alternatively, New Hampshire taxes, such as the property tax, corporate income tax, and tolls, are much more concentrated and visible. The state has no sales or personal income taxes. This has several implications for the way state actors are constrained in their policy decisions.
Cognitively, personal income and sales taxes fly under the radar of employees and consumers. The regressive 5.3% personal income tax automatically comes out of your check each week and the same percentage comes out whether you make $20,000 or $200,000. There is no sense among voters that politicians are “soaking the rich.” As for the sales tax, most people automatically compute it into their purchase decisions. Again, it is regressive in that the burden falls disproportionately on middle and lower income individuals who have a “higher propensity to spend.” There isn’t really a “redistribution” effect to these taxes.
Property taxes and tolls are both collected yearly or at the point of use. Along with corporate income taxes, they all target a concentrated group: property owners, drivers, and corporations. This actually creates an adversarial system where the majority tries to get as much as they can out of a minority group. Of course, as Mancur Olsen has taught us, smaller groups are much more able to form organizations to protect their interests. For example, the most successful anti-tax initiative in Massachusetts was Proposition 2 1/2 which limits property tax hikes.
The other major difference is the remuneration and number of legislators. Being a Massachusetts legislator is a fulltime job with excellent pay and even better health benefits. New Hampshire legislators get something like $100 per year and gas money. Additionally, despite having a significantly smaller population than Massachusetts, New Hampshire has more than twice the number of legislators. This makes rent-seeking a lot tougher.
From this perspective, state structure plays a much underappreciated role. While my dad’s moonbat thesis is interesting, I’m just not sure how well it stands up to a comparative analysis!