Families across New Hampshire know two truths. First, property taxes are unbearably high – and often highest for the least wealthy. Second, school funding is unfair – and inadequate for many cities.
Since the early 2000s, our low and middle income neighbors have struggled to make ends meet in the crosswinds of wage stagnation and rising living costs. Many are now flattened by the headwinds from the COVID-19 pandemic.
As of July 2020, half of New Hampshire households reported some loss of income from employment, and more than one in four households are now struggling to pay basic expenses. From Portsmouth to Pittsfield, from Lebanon to Lisbon, we have heard cries for transparency and fairness in the property tax system. Given the looming deficits in the school budget and possible cuts in state education subsidies, families will again bear the brunt of these twin crises as cities are forced to raise property taxes to fund schools that are already on point.
Property taxes are regressive in nature and are not related to solvency. The poorest 20% of households in New Hampshire (those earning less than $ 26,700 a year) paid 6.2% of their income in state and local property taxes in 2018, while the richest 1% (those earning more than $ 514,900) only 1.9% of their income was paid to state and local property taxes. Though the state pays little “adequacy” aid to cities to fund public schools, 73 cents of every dollar spent on school budgets comes from local property taxes. Real estate-rich cities with larger tax bases can better spread these costs among their residents, while real estate-poor cities have no choice but to further increase the burden on their residents in order to fund the bare minimum of a school budget.
The existing property tax relief program for low and middle income homeowners is a welcome aid to those struggling to make ends meet. However, the benefits of the program have declined sharply in recent years due to changes in statewide property tax.
For example, nearly 27,000 families benefited from this program in 2003, while that number had fallen to just under 7,000 in 2018. Over the same period, despite rising living costs and stagnating wages, the average discount fell from $ 275 to $ 160. Property tax breaks for those in need are critical to the survival of our neighbors and our local economic health. When tax burdens for working families are fair, households can spend more money on local businesses and benefit the entire community.
We filed HB 504 in response to activists across the state saying that low and middle income homeowners in every city are facing problems. The bill strengthens the property tax relief program by increasing both the number of households eligible for the program and the amount they can receive. With HB 504, individual heads of household earning less than $ 55,000 and married couples earning $ 70,000 or less together could benefit from the program. The bill adjusts income limits to keep up with inflation and offers discounts on state and local property tax bills for schools.
Other parts of the bill ensure that it remains taxable. For example, the bill puts a cap on both the amount of property tax relief available to each individual household ($ 1,000) and the total amount of total property tax relief available ($ 25 million). Most critically, however, the statewide education property tax (also known as SWEPT) is restored as a true statewide tax, ending the preferential (and likely unconstitutional) treatment currently received by around 33 property-rich cities.
It backs the state’s Education Trust Fund with approximately $ 25 million in excess SWEPT funds to support the expanded property tax relief program and requires the tax to use a tax rate that is common to all Real estate owner is effectively uniform in the state.
All municipalities would be required, after deducting their reasonable tax collection costs, to transfer the full amount of the nationwide property tax for education to the state. Restoring SWEPT in this way leads to a nearly decade-old injustice that has forced residents of less affluent cities to contribute to state educational aid at higher rates than their counterparts in affluent parts of the state.
The vitality of our entire Granite State community is only as strong as the families that make it up. Strengthening the property tax relief program is a critical step in delivering much-needed relief to those in need.
House Bill 504 will be negotiated on February 17th at 1:30 p.m. in the House Ways and Means Committee
(Rep. Dick Ames of Jaffrey is a member of the Ways and Means Committee. Rep. Dave Luneau of Hopkinton is a member of the Education Committee. Rep. Marjorie Porter of Hillsborough is a member of the city and district government committee.)