In 1999 the Supreme Court declared New Hampshire’s system of taxation “unconstitutional” based on the Claremont education funding decision. The Supreme Court forced the legislature to make a hard choice. The Claremont decision was based on Part 2 Article 5 of our Constitution, which says taxes “must be proportional.” Like any other state tax, like the Tobacco Tax, Gas Tax, Rooms and Meals, one rate statewide. It became clear that the state’s education regulations were mandates and therefore needed to be funded with a uniform tax rate.
Studies were done to determine the cost of the education regulations. Most every analysis showed that the so-called “property rich” towns, largely on the seacoast, resort lakes, or ski mountains, had plenty of valuable property and could easily raise money while many communities, including Manchester, Londonderry and Derry, struggled. Tax concepts were brought forward including an income tax, sales tax and statewide property tax. The state property tax emerged.
Similar to how we would think of it today, the statewide property tax was born in 1919 at a tax rate of $3.50 per $1,000 of value. So studies were done to see what would happen if a state property tax were to be re-enacted. Spreadsheets showed that if every community were to pay the same rate to cover the cost of the education regulations, the result would be that 75 to 80 percent of the state’s population would see a reduction in property taxes while the remaining percentage (20 to 25 percent), those property-richer communities, would see a tax increase. Ironically, even if this were enacted, the property-richer communities would still have the lowest property tax rates in the state.
While the property-poorer communities would run bake sales to pay for their attorneys, the property-richer communities simply hired lawyers to make the case that they would be unfairly treated by a uniform statewide property tax. They called themselves “donor towns.”
But which are the real donor towns? If the state constitution says that everybody needs to pay the same rate tax rate, but somehow the property-rich towns’ lawyers have tricked lawmakers into ensuring that they don’t actually have to pay the tax, thus, forcing monies to be raised from other sources, especially from property-poorer towns, is that fair? In reality, the property-poorer towns are contributing higher property taxes in order to ensure that the property-richer towns don’t have to pay the uniform rate. So who’s donating to whom?
Fred Bramante is a past chairman and memtber of the New Hampshire State Board of Education. He speaks and consults on education redesign to regional, state and national organizations.
