Allows municipalities to establish a cap on the education property tax for residents aged 65 and older, if the property has been the taxpayer's primary residence for at least 5 years and no school aged child has resided with the taxpayer for the last 5 years.
This issue concerns the real property tax, which falls on land and buildings, and not personal property taxes or real estate transfer taxes.
Property tax in NH: both state and local
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).
NH property tax rates
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.
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.
- New Hampshire tax rates are expressed as tax liability per $1,000 of equalized assessed local valuation ("value").
- Local 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).
Where does the money go?
Local roperty taxes are used predominantly 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.
How do NH property taxes compare to other states?
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.
- 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.
Why do property tax rates vary?
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.
However, 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.
Property tax: a progressive or regressive tax?
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.
PROS & CONS
"NH should continue to use property taxes instead of a sales or income tax."
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.
"NH should relieve the property tax burden by instituting a sales or income tax."
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 New Hampshire, 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.
Requires municipalities to notify the property owner of changes in the assessed value.
Allows towns and cities to adopt an education property tax credit for individuals over 55 years of age who have no children in the public school system.
Changes the residency requirement for the elderly property tax exemption from 3 to 10 consecutive years.
Allows municipalities to adopt a property tax exemption for veterans who have been determined by the U.S. Department of Veterans Affairs to have a 100 percent, service-connected, total and permanent disability.
Clarifies the property tax exemption for certain permanently and totally disabled veterans by referencing the definition of permanent total disability in the federal regulations.
Increases the thresholds for statewide education property tax rebates for low income homeowners.
Prohibits the state from establishing any new property tax exemptions or credits unless they are fully funded by the state or approved by the local legislative body of the political subdivision.
Requires municipalities to return any Statewide Education Property Tax to the state that exceeds the calculated cost of an adequate education.
Requires the Department of Environmental Services and the Department of Health and Human Services to establish a data sharing protocol regarding certain health and environmental information, particularly environmentally-triggered chronic illness. A conference committee amended the bill to clarify that campground owners are not responsible for collecting property taxes on recreational vehicles.
Allows cities and towns to adopt an exemption against the statewide property tax for residents over age sixty-five who have lived in town for at least thirty years.
Changes the interest rates on late and delinquent property tax payments from a fixed rate of 12% for pre-lien payments and 18% for post lien payments, to the annual underpayment rate determined by the Commissioner of Revenue Administration, based on the rate specified in the Internal Revenue Code. This would most likely lower the interest rates on late and delinquent property taxes. The Senate amended the bill to lower the interest rates on late and delinquent property tax payments to new fixed rates of 8% for pre-lien payments and 14% for post lien payments.
Allows towns and cities to require owners of business property to provide upon request income and expense information for purposes of determining market value.
Allows cities and towns to adopt a property tax exemption for totally and permanently disabled veterans. The Senate amended the bill to instead increase the optional local tax credit for service-connected total disability from $2,000 to $4,000.
Allows towns to adopt up to a $500 annual property tax credit for members of the New Hampshire national guard and armed forces reserves engaged in combat service.
Repeals the property tax exemption for recreational vehicles ("campers"). The Senate amended the bill to instead modify the tax. For example, the bill removes the requirement that exempt recreational vehicles have a valid motor vehicle registration and number plate. Also, under this bill campground owners would no longer have to provide local assessing officials with the name and address of recreational vehicles at the campground that fall within the tax exemption.
Increases the maximum property tax credit towns may adopt for veterans, from $500 to $1,000. The Senate amended the bill to increase the credit to just $750.
Reduces the business profits tax rate from 8.2% to 4%; repeals the business enterprise tax, statewide property tax, utility property tax, and interest and dividends tax; establishes an income tax of 3.95%; and requires the state pay 35% of contributions of retirement system employers to some members beginning in fiscal year 2021.
Requires towns and cities to give notice to property owners when a property reassessment affecting the owner's appraisals for tax purposes is completed.
Enables municipalities to reduce the assessed value of qualifying historic residential structures based on an analysis completed by an architectural historian.
Allows towns and cities to adopt a system of monthly payments for owners of manufactured housing with delinquent property taxes.
Clarifies the current requirement that private use or occupancy of public property is subject to property taxation. This bill also allows local property tax exemptions for leases of publicly owned agricultural land.
Eliminates the requirement for municipalities to annually deduct the value of water and air pollution control equipment from property tax.
Establishes an option for a local sales tax, not to exceed 1.5%, with the purpose of reducing property taxes. The bill excludes some purchases from taxation, such as clothing and shoes under $175, funeral charges, motor fuels, etc.
Allows towns and cities to double the optional veterans' tax credit against property taxes.
Creates a statewide property tax refund for taxpayers who received the Federal Child and Dependent Care tax credit.
Changes the calculation of property taxes to use the assessed value from the prior year and tax rates from the prior year so that budgets can be adopted using known revenues.
Establishes a commission to study adaptation of the tax structure of the state to economic and demographic changes.
Allows a town or city to adopt a property tax exemption for persons who have installed an emergency stand-by generator for use by an elderly person or person with a medical necessity.
Requires assessing officials to make three attempts for an in-person inspection of property before applying a statistical update to an appraisal for property tax purposes.
Removes the authority of assessing officials to obtain an administrative inspection warrant to inspect property to complete an inventory or appraisal for purposes of property taxation.
Requires property tax bills to include an informational statement explaining that the taxpayer has the right to apply for an abatement if they disagree with the assessed value of the home.
Allows town and cities to adopt an additional exemption from property taxes for certain totally and permanently disabled veterans.
Establishes a commission to study taxability of lease interests in public property.
Makes the landowner liable for unpaid tax bills of manufactured housing owners.
Allows towns and cities to increase the optional tax credit for service-connected disability to 100% of the property tax.
Allows a municipality to adopt a property tax credit for home health care services of a family member.
Prohibits the execution of a tax lien for nonpayment of property taxes if the property is the primary personal residence of the taxpayer.
Establishes a property tax refund for taxpayers who claimed the federal child and dependent care tax credit.
Increases the eligibility levels for the low and moderate income homeowners property tax relief. This bill also applies the interest and dividends tax to trusts, increases exemptions for the tax, and extends the interest and dividends tax to capital gains.
Imposes a 2.25% retail sales tax. The bill also imposes a 2.25% use tax on the use or storage of property in New Hampshire when no sales tax has been paid. Use tax is imposed, for example, when a New Hampshire business buys property out of state tax-free and uses it in New Hampshire. It also applies when a business makes personal use of property that it has purchased for resale or has manufactured for sale. Sales for resale, casual sales, and sales of specific items such as gasoline, heating oil, medical supplies, and items of clothing under $175 are all exempt from taxation.
Makes various changes to the laws governing the statewide education property tax. In particular, this bill establishes the rate of the statewide education tax at $8 per 1,000 of the value of taxable property and transfers the authority to collect the education property tax from the municipalities to the Department of Revenue Administration. This bill establishes a homestead exemption from the education property tax for the first $250,000 of assessed value of homestead property. The bill also requires an annual transfer of $150,000,000 from the education trust fund to the general fund.
Adds information to property tax bills about the availability of property tax relief for low income residents.
Cuts property taxes for homeowners over 80 years-old who have lived in the home for at least five years.
Repeals the property tax exemption for the water and air pollution control facilities.
Increases the maximum amount of the optional veterans' property tax credit.
Allows a town or city to require that an applicant for the property tax exemption for the disabled be a resident of the town or city for 5 years rather than only a state resident for 5 years.
Allows municipalities to adopt a property tax credit for elderly homeowners to the extent their tax bill exceeds 10 percent of income.
Establishes a commission to study the impacts of the property tax on New Hampshire’s residents, businesses, municipalities, and economy.
Extends the property tax program in Coos County to all municipalities, which allows them to offer property tax exemptions to foster commercial and industrial construction. Before amendments, the bill would have only extended the program to Carroll County.
Enables towns and cities to adopt an additional veterans’ property tax credit for all honorably discharged veterans
Allows municipalities to extend the veterans property tax credit to residents who served for a period determined by the city or town of at least one year active duty in the armed forces, and to their surviving spouses. The bill also allows for a different tax credit amount to be applied for such veterans.
Uses tobacco tax and tobacco settlement funds to reduce the education property tax.
Allows active duty service members to receive a property tax credit for veterans.
Creates a committee to study the impact of the property tax on businesses and residents.
Allows towns to decrease the elderly property tax exemption if other income-earning adults live with the elderly resident.
Makes administrative changes to the meals and rooms tax, and establishes requirements and procedures for a municipality to calculate and set the applicable tax rates for property taxes.
Exempts parents from the education property tax if their children are not enrolled in public school.
Should NH continue to use property taxes instead of a new broad-based tax, such as an income tax?
Rep. Barbara Comtois has proposed two bills related to property taxes, one for an exemption for disabled veterans and another that allows municipalities to establish a cap on the education property tax for residents aged 65 and older (if the property has been the taxpayer's primary residence for at least 5 years and no school aged child has resided with the taxpayer for the last 5 years).
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