The New Hampshire tax system is completely skewed toward the collection of property tax.
N.H. has no other tax base other than property tax. Sales tax and income tax proposals get shot down when brought to the General Court and the only other taxes levied on residents are federally imposed such as federal income tax and rooms and meals tax.
The issue with property tax is how inequitable it is for the citizenry. Property tax is based on market values that fluctuate over time, which is fine if values decrease. Unfortunately, that is not the case in N.H. According to the New Hampshire Association of Realtors website, the average single-family home in 1998 cost $127,500 and that value as of 2021 was $395,000, meaning home values have increased 310% over 23 years, an average of 13.5% year over year.
The housing value increase over that period of time means an average home with a tax rate of $15 per thousand would have paid $1,912.50 in tax for the year; that same household is now paying $5,925 in tax.
Over that same period of time, average income in N.H. rose from $44,960 in 1998 to $88,840 in 2021, a 198% increase overall or an 8.6% increase year over year. Sadly, we do not live in a world of averages.
The median income in many N.H. towns and cities is significantly below that average income, such as my hometown of Charlestown, N.H. The median income of Charlestown is roughly $46,000 with a property tax rate of $34.31 per thousand of assessed property value. High property tax, like austerity politics, sets municipalities in a tailspin, forcing local governments to get money from people who just do not have it. However, N.H. should take a lesson from Sweden.
Sweden has a very low property tax rate, limiting the amount of Krona paid to kr7.50 per thousand (0.75%) or a maximum amount of kr9,525, equivalent to $914.40. The primary mode of tax collection in Sweden is through municipal income taxes, with the average rate being 33%. There is a state income tax that goes to the Government of Sweden, at a rate of 20%, however that only affects income in excess of kr598,500 ($57,456). This is not a tax that would affect the average Swede, as the median income is kr440,400 ($42,278.40), as well as a significant “basic tax-free allowance” and “earned income tax credit” that supports the average worker.
If N.H. was to apply a similar tax system where individuals paid a local income and state income tax and greatly draw back the current property tax system it would work better for low-income earners and make government funding so much easier. It would make taxation more equitable across income brackets. It would ease the struggle on families in homes as home value is independent of income and make it less likely for a senior citizen to have to worry about being taxed out of their property.
It should drive rent prices down as well, since one of the largest costs of a property is the tax bill. Adding a state income tax that only kicks in after a certain income threshold and setting a state property tax for properties over a certain valuation would greatly increase funding for the state. It would also ensure that wealthy persons are paying sufficient tax and not hiding in a town with low property tax such as Moultonborough, N.H. These tax haven towns are an unfortunate occurrence in the state; the city of Claremont with a population of roughly 13,000 has similar tax contributions (approx. $33 million) as Moultonborough (approx. $31 million), with a population of roughly 4,900. However Moultonborough is valued at roughly $5.6 billion, whereas Claremont is valued at $1.1 billion.
Dr. Bob Moorehead, author of “The Paradox of Our Age,” said, “We’ve learned how to make a living, but not a life; we’ve added years to life, not life to years.” If we as a society learned to be introspective of this paradox, we could make the world a little better for ourselves as a whole. This shift in tax policy would do nothing but good for N.H., as local governments could fund properly without having to squeeze every last penny out of struggling people and stimulate the economy in a way we have not seen, making life just a little more liveable.
Timothy Fitzpatrick can be contacted at
tfitzpatrick@kscequinox.com
