How does New Hampshire set the tax rate?

By Terri O'Rorke, 21 October 2024
State of New Hamsphire seal on the outline of the state

Good question. I don’t know. Let’s find out together. . . 

Property tax rates are set every fall by the Dept. of Revenue Administration (DRA) and is meant to be a means of checks and balances for each community. Each municipality sends in its total assessed value, exemptions, credit figures and municipal budget for a rate calculation. County and school districts do the same by sending in their proposed budgets and the state legislature sets the education budget. 

When the DRA receives all required documents, the tax rate is calculated by dividing budget totals by the total taxable assessed value of the city or town. Let’s put this in understandable numeric terms: if the total of all the budgets for a community is $100,000 and the total taxable assessed value of that community is $1,000,000 then the tax rate would be set at $10. 100,000 divided by 1,000,000 would equal .10 or $10 per thousand.

OK, now that we get the gist of it, would it surprise you to know that over the past 20 years property taxes have tripled?? Why? Have costs and spending increased in our cities or towns? Yeah, probably, but the main culprit for these increases has been the state placing more costs onto the property tax payer. Let’s explore a few places where that is happening:

-Meals and Rooms Tax: RSA 78-A became law in 1967 and is a tax collected by hotels, restaurants, caterers, and other businesses. That tax money is then sent to the state. Some of that money goes toward school building loans and tourism promotion. Additionally, state law requires 40% be returned to towns based on their population, but for far too many years the state has ignored their legal obligation for revenue sharing. In the meantime, revenues have increased due to this tax but barely 21% sees its way back to communities. This leaves the property tax payer stuck with making up the difference while the state has reaped the benefits of millions of dollars.    

-Business Profits Tax: Enacted in 1970, this is a flat-rate tax on a business’s taxable income (taxable income determined by federal income tax rules, with a few adjustments) and historically has been one of the largest sources of general fund revenue. However, since 2015, Republican legislators have continuously lowered the state’s business profits tax, taking it down from 8.5% to 7.5% in intervals of two-tenths of a percent. The reduction has been praised as a way of making NH more enticing to businesses, encouraging expansion, hiring more employees and growing the economy.
Who benefits? The state, with business tax revenue increasing 118% since the tax cuts began. Originally, the state was obligated to share with municipalities, but with incremental decreases over the course of 20 years, municipalities now receive nothing, having to make up for that loss (millions of dollars) with increasing property taxes. 
Not surprisingly, the majority of Republican candidates running for either re-election or for the first time are in favor of decreasing this tax while they are against a capital gains tax on our wealthiest residents (which is basically just a handful). 

-State bridge aid: With no funding by revenue from gas and tolls the amount of “Red List” bridges either grows or stays the same. Towns whose bridges need repairs do so at their own expense, property taxes. Luckily, because of the Infrastructure and Inflation Reduction Act that was passed into law by Pres. Biden in 2021, a lot of communities will see federal monies to aid in needed repairs. 

-Education Freedom Accounts: Otherwise “fondly” referred to as those damn school vouchersArticle 83 of the NH constitution specifically states “. . . that no money raised by taxation shall ever be granted or applied for the use of the schools of institutions of any religious sect or denomination.” What part of that wording is so hard for Republican candidates to understand as they continue to raid the funding for public education. 

This is unsustainable for property owners. If you feel the same way then be sure to use your voice and your vote on Nov. 5th!