By GARRY RAYNO, Distant Dome
If you want to understand New Hampshire’s unique tax system with its glaring inequities and foibles, you need to read Phil Sletten’s property tax analysis “Property Taxes in New Hampshire: How They Work and How They Compare,” released last week.
The standard information is included such as the state is more dependent on property taxes than other state, provides local government less aid than almost all other states, and the property tax burden is a product of where you live as much as the value of your abode.
But there is so much more that Sletten, research director of the NH Fiscal Policy Institute, delves into in his research and analysis piece that policy wonks will find of interest and reams of material to tuck away.
From the larger picture, the most striking information is property taxes provide 63 to 64 percent of the revenue for all forms of government in New Hampshire from the state to the county to towns and schools.
That is nearly two-thirds of all government revenue raised in New Hampshire and by far the most of any state in the union.
The state that is the next most dependent on property taxes for government funding is Texas at 40 percent, and that is less than half not approaching two-thirds.
While property taxes were once reflective of a person’s financial standing when land equaled wealth they are abnormal today and the most regressive tax the state has, and it has plenty.
A regressive tax is one that hits the least able to pay the hardest while those with the greatest ability to pay have a light burden.
In the Granite State, the top earners pay less than half of the percentage of their income than do low- to moderate-income earners: 3 percent versus over 6 percent.
The second biggest revenue source for state government funding are business taxes, which account for 13 percent of all government revenue versus 64 percent for property taxes.
There are consequences when government derives two-thirds of its funding from a source that does not treat property owners equally across the state.
Property taxes depend on two things, a community’s property tax base in value, and the number of people who pay them.
If a community happens to border a large lake, or the ocean or have mountains large enough for a ski area, or if a large portion of a town is commercial or industrial property the property tax burden is lower compared to other communities.
For example, the town of Newington borders the Great Bay and the Piscataqua River and also hosts large commercial development along Route 16 and industrial development along the river.
But a large section of the town is tax exempt as it once belonged to the US Air Force but now belongs to the state with a large section a wildlife refuge.
Despite that, Newington’s tax rate is one of the lowest in the state with $1.53 million worth of property supporting each of its 837 residents meaning its tax base is $1.28 billion. The town’s tax rate is $7.88 per $1,000 of equalized value, with the per person property taxes $11,343.
On the other hand there is Charlestown on the western side of the state along the Connecticut River. It is largely residential with numerous trailer parks, most of the industry left town ages ago, a few large farms and a significant amount of land in current use, a state program that is funded by the property taxpayers in the community where the land is located.
Charlestown has $122,152 worth of property supporting each of its 4,919 residents.
Charlestown’s tax base is $601 million. The tax rate is $36.54 per $1,000 and the per person property tax is $2,517.
The contrast between two neighboring towns can also be significant.
Sunapee lays claim to about half of Lake Sunapee with beautiful homes lining the shore and several small commercial districts.
The town has $843,789 worth of property supporting each of its 3,459 residents. The town’s tax base is $2.92 billion and its tax rate is $10.55 per $1,000.
The per person property tax is $6,967.
In Newport next door, with no large water body, a former textile town with the industry long since gone south, and that held the first winter carnival in the country, there is $134,502 worth of property to support each of its 6,418 residents.
The town’s tax rate is $25.09 per $1,000 and the per person property tax is $2,786. The town’s tax base is $863 million.
The average sale price of a home in New Hampshire is over $500,000. In Newington, the taxes on the $500,000 home would be $3,940, in Sunapee, $5,275, in Newport, $12,545, and in Charlestown, $18,270.
Another interesting thing to look at in the four communities is the percentage of property taxes that pay for schools, because as we know New Hampshire pays the least of any state in the country for public schools.
In Newington, with its local school tax $1.18, that is 15 percent of the total tax.
In Sunapee, with the local school tax $4.31, that is 40 percent of the total tax.
In Newport, with the local school tax $13.61, that is 54 percent of the total tax.
In Charlestown, with the local school tax $23.34, that is 64 percent of the total tax.
The local school tax is the figure for what local voters decided to spend on schools.
You can see that the greater the community’s property value, the smaller the percentage of the community’s spending is dedicated to schools, leaving room to spend on other things.
When the statewide property tax is included, you have the total percentage of property taxes spent on education in each community.
Newington, spends 29 percent of its total property taxes on schools; Sunapee, 52 percent; Newport, 59 percent, and Charlestown, 69 percent.
Perhaps the most compelling aspect of the study is what Sletten says in the conclusion.
“New Hampshire’s reliance on property taxes as currently structured has consequences for residents, particularly those with lower and moderate incomes and in communities with relatively low levels of property wealth compared to public service needs. Disproportionately using property tax revenues to fund services, and having a higher likelihood of those dollars remaining only at the local level relative to other states, may result in communities with less wealth facing persistent limitations on their abilities to invest in themselves and their people.”
If you look at the figures for the four communities, Newport and Charlestown spend more than half of their property tax revenues on public education and they have more than double the tax rates of the other two communities.
With such a large percentage going to pay for public schools, there is little room for other investments by these communities such as recreation, or programs for seniors or infrastructure, which particularly for water and sewer, is the biggest barrier to the state’s housing crisis because it is so expensive for a community to install or expand their sewer or water systems to accommodate new development. And developers do not want to pay the entire cost.
For all the legislators’ chest thumping and bullying of towns over their zoning and planning regulations, the one thing the legislature could have done to truly spur new housing was appropriate money for water and sewer projects, but they did not do that, any more than they have paid for the cost of an adequate education over the last three plus decades after the Supreme Court ruled it was their obligation.
Why you ask? You just need to read the response to Sletten’s work from House Majority Leader Jason Osborne to know why.
“Let’s all give a slow round of applause to the Fiscal Policy Institute for finally waking up to the reality that our caucus has been shouting for years. While the NHFPI was busy trying to figure out how to leverage burgeoning property taxes to institute an income tax, Republicans have taken action. Our caucus passed the Property Tax Protection Act, despite Democratic objections, to give voters the tools to cap their towns’ out of control spending.”
“If your property tax bill looks like a ransom note, don’t let the NHFPI lie to your face. They want you to believe your town has a ‘revenue problem. In simple terms, that means: ‘we want an income tax.’ Our towns don’t have a revenue problem; they have a spending problem. Republicans are handing you the tools to force the big spenders to fall in line. The era of unchecked mandates and bottomless budgets is over.”(punctuation errors from the House Majority Office.)
It is not the institute that is lying to your face.
The only education spending that increased meaningfully over the last five years has been the more than $100 million poured into the Education Freedom Account program — a favorite of Free Staters and Libertarians — with 80 to 90 percent of the money going to families wealthy enough to afford to send their kids to religious or private schools or home schools and many of the students were never in a public school classroom.
More of the same far right focus on taxes and spending as evil incarnate will sentence Charlestown, Newport, Franklin, Claremont, Berlin, Pittsfield and others like them to death spirals, their children will suffer along with the property taxpayers, while Republicans will pass yet another state down spending cap or convert public schools to charter schools to save more money so those at the top of financial scale can contribute less to the state’s well-being.
Without investment, the state will stagnate, the companies will move out, not just stop coming in, and all of New Hampshire will eventually be like Franklin, Newport, Claremont and Berlin after the mills left.
Garry Rayno may be reached at garry.rayno@yahoo.com.
and state happenings for InDepthNH.org. Over his three-decade career, Rayno covered the NH State House for the New Hampshire Union Leader and Foster’s Daily Democrat. During his career, his coverage spanned the news spectrum, from local planning, school and select boards, to national issues such as electric industry deregulation and Presidential primaries. Rayno lives with his wife Carolyn in New London.