New Hampshire Transportation Funding Plan

An Empirical Analysis of Potential Revenue Sources
PRS Briefs
PRS Policy Brief 0708-15
Friday, July 18, 2008
Alex
Becker
Patrick
Dooley
Shaun
Stewart

Over the next ten years, New Hampshire faces a $1.74 billion deficit in its plan to build and repair state highways and bridges according to the New Hampshire Department of Transportation. In order to avoid delays in construction and potentially hazardous transportation infrastructure conditions, New Hampshire must improve its returns on existing revenue sources or seek out additional sources. A properly maintained transportation system is critical to the safety and prosperity of New Hampshire's residents.

This paper analyzes in detail nine potential revenue sources that New Hampshire could draw upon to pay for the $1.74 billion deficit. Among our major findings:

  • Gasoline Tax - New Hampshire could fully fund all transportation projects until 2018 from a 17 cent increase in the gas excise tax. A nine cent increase, placing New Hampshire at the national gas tax average, would generate $923 million in revenue from 2008-2018.
  • Motor Vehicle Taxes - Increasing the motor vehicle fees above their current 3.3% per annum increase would not generate enough revenue to be able to cover the deficit; however, it could be one component of a revenue increase.
  • Interest and Dividend Tax - Increasing the interest and dividend tax by one percent would generate an additional $283 million dollars in revenue from 2008-2018. Decreasing the interest and dividend taxable levels to $1200 and $2400 for individuals and joint filers respectively, would generate an additional $154 million in revenue over the ten year time period.
  • Sales Tax - Adopting a one percent broad-based sales tax would generate an additional $218 million dollars in annual revenue for New Hampshire, which is more than sufficient to fund transportation projects until 2018.
  • Cigarette Tax - New Hampshire would generate an additional $1.6 million dollars per year for every one cent increase in the cigarette tax.
  • Alcohol Tax - A five-cent increase in the excise tax on beer would only generate an additional $16.8 million in revenue for the state, an insufficient amount of funding given the magnitude of the highway funding deficit. New Hampshire would have to substantially increase its excise tax and implement a sales tax in order for the beer tax to generate sufficient funding.
  • Gambling Taxes - The addition of a proposed "racetrack casino" at Rockingham Park in Salem, NH, would, even by conservative estimates, generate over $1 billion in revenue for the state over 10 years.
  • Privatization - Privatizing state services would not increase revenue or lower costs enough to make it a viable revenue source.
  • Leasing State-Owned Land - New Hampshire does not have enough value in its surplus state land to make leasing state-owned land a significant revenue source.

At this time, it is uncertain how much the state should rely upon a particular revenue source or combination of sources to cover the transportation deficit. In order to determine the most politically viable combination of sources, the Rockefeller Center surveyed New Hampshire residents regarding their attitudes toward each policy option or combination of options. Once these data are analyzed, a more precise conclusion might be drawn regarding which revenue sources New Hampshire might consider pursuing.