Property Taxes - Issue Summary

Should our government rely on property taxes?

Issue Facts

By: Daphne Kenyon
This issue has been updated by LFDA editors.Should our government rely on property taxes?

This issue concerns the real property tax, which falls on land and buildings, and not personal property taxes or real estate transfer taxes.

New Hampshire is one of the few states in which both the state and local governments levy property taxes.
Property tax rates are applied to the assessed value of a property.  In practice assessed values can be above or below market value even though the standard of assessment in New Hampshire is 100 percent of market value. 

Tax rates in New Hampshire vary by town and have four components: town tax rate, local education tax rate, state education tax rate, and county tax rate.

New Hampshire tax rates are expressed as tax liability per $1,000 of equalized assessed local valuation (“value”).  Municipal property tax rates for 2008 ranged from $4.68 for the Town of New Castle to $32.59 for the Town of Claremont. The median total tax rate was $18; at this rate, taxes due on real estate assessed at $200,000 would be $3,600.

Because not all towns assess properties at 100 percent of market value, it is important to distinguish between nominal and effective or full value rates.  Full value rates adjust property tax rates to take differing assessment/market sales ratios into account.  In 2007, the latest year available, full value tax rates ranged from $3.49 for Hale’s Location to $31.93 for Berlin.

In 2006, total assessed value in the state was $15 billion.  Residential property accounted for the largest portion of assessed value (79 percent) followed by commercial and industrial property (16 percent).

All different kinds of property in New Hampshire are taxed uniformly, that is, at the same rate per $1,000 of value. For example, a single-family home is taxed at the same rate as an apartment building, a commercial building or industrial property.

Property taxes are used predominantly by local governments to finance schools, police and fire protection, trash collection, street maintenance, and public recreation, among other local services.  The state property tax is used to fund K-12 education. New Hampshire derives 61 percent of its total state-and local taxes from property taxation, compared to 31 percent for the average state.

The burden of real estate taxes on New Hampshire citizens, when compared to other states, is a matter of considerable debate, because this burden can be measured in various ways.  When effective property tax rates are considered, Manchester New Hampshire ranks between 13th and 45th among the each of the 50 states’ largest cities, depending upon the type of property considered. When compared to personal income, in 2005 New Hampshire had the third largest property tax burden per capita at $2,034 per capita and the highest property tax burden as a share of personal income in the nation at $54.11 per $1,000 personal income.

A community’s property tax rate is not a good measure of the property tax burden faced by the residents.  A new entrant into a community typically pays less for a home with a high tax rate.  This phenomenon is known as “tax capitalization.”  Thus two homeowners in different communities can face very different tax rates, but the same cost of housing.  One homeowner can have high mortgage payments but a low property tax bill, while the other homeowner has low mortgage payments and a high property tax bill.

Some communities may have high property tax rates because they zone out commercial and industrial property and other communities have high property tax rates because they vote for more expansive government services.
Although widely assumed to be regressive, researchers agree that the property tax is not generally so, and, to the extent that it is a tax on capital, it can be progressive. Furthermore, the property tax is more progressive than the sales tax.

Average property tax burdens in New Hampshire today are similar to those of 40 years ago, constituting 5.4 percent of personal income in 2005, only slightly higher than 5.3 percent in 1962. Property tax burdens were highest in 1972 and 1992, when property taxes as a percent of personal income exceeded 6 percent.

2014 Legislation

Rep. Janice Schmidt (D-Nashua) sponsored HB 1171, a 2014 bill that would have allowed service members (not just retired) to receive a property tax credit for veterans.  The House killed that bill March 19, 2014.

Rep. Judith Spang (D-Durham) was the primary sponsor of HB 1195, a 2014 bill to study the impact of the property tax on businesses and residents.  That bill passed the House but died in the Senate.

Rep. Gary Daniels (R-Milford) sponsored HB 1333, a 2014 bill which allows towns to decrease the elderly property tax exemption if other income-earning adults live with the elderly resident.  That bill also died in the Senate.

Sen. Andy Sanborn (R-Bedford) is sponsoring SB 300, a 2014 bill that "establishes requirements and procedures for a municipality to calculate and set the applicable tax rates for property taxes."  The Senate passed that bill on March 13, 2014.  The House scheduled a vote on that bill April 23, 2014.

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Pros

Pro Issue Opinion by Daphne Kenyon, for property taxes:

 
 
 
 

It is stable and responsive to economic growth:

  • It provides stable revenue. The property tax is more stable, for example, than a sales tax or income tax.
  • Property tax revenues tend to be responsive to economic growth.  For example, in New Hampshire in the 1970s and 80s, both population and total property values increased rapidly.

It is visible and promotes fiscal responsibility:

  • The visibility of the property tax may be beneficial as it allows taxpayers to weigh the benefits of government services against taxes paid thereby making government more efficient and more responsive to citizens. Hence it promotes local fiscal responsibility and civic engagement.
  • It is particularly suited to local governments, because they face difficulties when they try to tax a mobile tax base, and the property tax base is generally less mobile than sales or income.

Inequities are easily resolved:

  • States can address taxpayer inequities in real estate taxes with state-funded circuit breaker programs. States and communities generally provide for real estate tax relief for seniors and low-income tax-payers.

Taxpayers can adjust their taxes up or down:

  • Individuals can control their property taxes by choosing the property they own, and changing this property when appropriate. Other tax regimes do not give citizens that choice.
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Cons

Con Issue Opinion by LFDA Editor, against property taxes:
 

Communities with relatively low per capita property wealth are unfairly penalized:

  • Disparities in per-pupil property wealth in a community may lead to inequities in funding education for children or taxpayers. The same may be true for other municipal services.

Its relationship to taxpayer ability to pay is inexact: 

  • If a family’s income is reduced through job loss, illness, or divorce, property tax liability is not reduced. When property taxes are increased, to pay for new schools or for other reasons, seniors or others whose incomes are not growing may find it difficult to afford to stay in their homes.

It unfairly affects economic development:

  • Heavy reliance on the property tax can lead to land use choices based mostly on revenue considerations.  For example, towns and cities sometimes zone against small and multi-family housing based on the assumption that affordable housing means more children, and more children means having to provide more schools, thus increasing already burdensome property taxes.

In NH the property tax is not in balance:

  • Relying too heavily on a single tax accentuates its weaknesses.  Since New Hampshire has no income or sales tax, it relies more heavily on the property tax than any other state.
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Property Taxes Member Posts
Take Action

If you are interested in property taxes and want to take action here are some choices:

  • Contact one of the organizations listed in Learn More. These groups represent the pro or con positions of issues.
  • Contact a government official as follows:

1. Contact members of the New Hampshire House of Representatives or the New Hampshire Senate.

2. Contact the Committee chairperson or members of the House Local and Regulated Committee or the Senate Public and Municipal Affairs Committee – these are the committees that oversee this issue.


3. Contact your local officials.


4. Give your opinion to Governor Maggie Hassan

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Learn More/Take Action

Should New Hampshire government rely on property taxes? Whatever your thoughts are, we urge you to make your voice heard. See the "Learn More/Take Action" section on this page for more information.

Issue Status

Property taxes throughout the state continue to rise. Every legislative session, numerous bills are introduced that would attempt to decrease the property tax burden by introducing other taxes, like an income tax, but these attempts have repeatedly failed.

Sen. Andy Sanborn (R-Bedford) is sponsoring SB 300, a 2014 bill that "establishes requirements and procedures for a municipality to calculate and set the applicable tax rates for property taxes."  The Senate passed that bill on March 13, 2014.  The House scheduled a vote on that bill April 23, 2014.

News

April 9, 2014
Nashua Telegraph: NH tax burden is (almost) lowest in country despite lots of property tax
April 8, 2014
Concord Monitor: State House Memo: Casino bill will bring property tax relief
April 7, 2014
Nashua Telegraph: Elderly, disabled and low income, and many veterans, can apply for property tax relief
April 3, 2014
Concord Monitor: NH tax receipts continue positive trend
Union Leader: Think tank says NH tax burden among lowest
March 13, 2014
Union Leader: House votes to form Property Tax Study Committee
March 12, 2014
Union Leader: NH casino advocates plan to tie property tax relief to bill to attract votes
Nashua Telegraph: NH casino advocates plan to tie property tax relief to bill to attract votes
February 28, 2014
Conway Daily Sun: Tax cap could be a hot topic at town and school deliberative meetings next week
February 27, 2014
Union Leader: Conway voters poised to make tax cap history
February 24, 2014
Nashua Telegraph: March 1 deadline for some property tax
February 20, 2014
WMUR: Cities with the highest (and lowest) taxes
December 4, 2013
WMUR: NH on list of highest property taxes in America
November 25, 2013
WMUR: Highest property taxes in America
November 18, 2013
Eagle Tribune: Taxes set to jump
November 15, 2013
Concord Monitor: Most local property tax rates will increase in 2013
November 10, 2013
Union Leader: Gilmanton tax burden DOWN 9.4%
November 4, 2013
Union Leader: Derry taxes to climb 3.3% say town officials
November 2, 3013
Seacoast Online: New Hampshire late setting property tax rate
October 30, 2013
Union Leader: New Hampshire lags in setting local tax rates; bills will be late
October 27, 2013
WMUR: Property tax avalanche threatens homeowners
October 4, 2013
Seacoast Online: Tax rates expected to be finalized on time
October 3, 2013
Seacoast Online: Delayed tax rates draw ire in Seacoast communities
Union Leader: Property tax bills will now be coming on time
September 6, 2013
Seacoast Online: Towns oppose bill to cut taxes of disabled veterans
Keene Sentinel: City Council candidate says property is now tax-exempt
August 22, 2013
Citizen of Laconia: Meredith tax abatement suit continues
July 31, 2013
Eagle Tribune: New Hampshire property tax collections remain steady
July 20, 2013
Citizen of Laconia: Taxpayers' Association and Mayor disagree over citywide reval
July 8, 2013
Seacoast Online: Greyer N.H. could have long term consequences
July 3, 2013
Seacoast Online: Exeter will use LGC funds to reduce property taxes
June 27, 2013
Citizen of Laconia: City property tax to increase
June 11, 2013
Union Leader: To dodge larger property tax hike, Berlin asks feds to cover cost of four firefighters
May 18, 2013
Foster's Daily Democrat: Property tax relief program offered Monday
April 28, 2013

Seacoast Online: Elder property tax exemptions raise concerns
April 7, 2013
Concord Monitor: Concord officials rethink annual property assessments
February 10, 2012 

Laconia Sun: The 'pledge' is actually a promise to raise our property taxes
February 14, 2012
Nashua Telegraph: Study: As state funding dwindles, reliance on property taxes increases
March 20, 2010
Foster's Daily Democrat: Some call for state tax system overhaul
May 16, 2009
SeacoastOnline: Residents take shots at 'NH advantage'