Reliance on Property Taxes: The Benefits and Risks to New Hampshire
New Hampshire is widely known for its unique tax laws. While the Granite State has no sales tax, it boasts one of the highest property tax rates in the country (second only to New Jersey). The State of New Hampshire reports that in 2017, property taxes accounted for over $3.6 billion of New Hampshire state and local revenue, which the second largest source of tax revenue (business taxes) accounting for only about $640 million of state and local revenue. So how does the state benefit from its reliance on property taxes; and how is it at risk?
Heavy reliance on property taxes for state and local revenue allows the State of New Hampshire to avoid a sales tax on goods, such as retail items, which attracts shoppers from surrounding states to New Hampshire-based stores. Additionally, New Hampshire’s property tax revenue makes possible the absence of state estate and inheritance taxes.
However, despite the benefits of a property-tax heavy revenue stream, New Hampshire is also at risk for its dependence on real estate tax. High property taxes impose large burdens on homeowners, and are particularly hard hitting for low-income property owners. Large tax burdens often incentivize would-be property purchasers to hold off purchasing real estate. Additionally, state and local funds are at risk of being inadequately funded should the housing market decline and property owners struggle to meet their tax burden.
While high property taxes allow the State of New Hampshire to eliminate certain taxes, it puts the state and municipalities at risk because of high dependence on this single source of revenue. For more information on real estate taxes, please contact Allobar Strategies.