Property Tax Capitalization in New Hampshire Housing Values

This paper focuses on the capitalization of property tax rate in housing values in towns of New Hampshire. The state lacks income and sales tax revenues, so the property tax is very volatile to the assessor’s ambitions for the fiscal year and considerably high for a state that doesn’t provide much except rural living. New Hampshire has only three interstates and one West to East highway, minimal coast line, and significant state and national forest areas, so high property tax rates must reflect more state offerings than is blatantly obvious. Test results, of manually gathered and assembled from various New Hampshire state bureaus, show expected inverse relationships between the total property tax rate and housing values as well as an unexpected inverse relationship between local education tax rates and housing values. Through econometric analysis of panel data, this paper tested the effects of a change in the property tax rate and local education tax rate on the Housing Price Index value (HPI) for individual towns for which data is available. For thorough analysis, independent characteristics such as unemployment rate and population density are considered for their effects on property values via the property tax rate. The models find that there is a small and insignificant inverse relationship between the property tax and the HPI appreciation while the other characteristics vary by year. Contradictory to literature, the tests find a negative and significant relationship between the local education tax rate and housing values. Assuming capitalization occurs, the correlation can be interpreted as inefficient use of funds, cross subsidies in cooperative and regional school districts, or data error. This paper discusses bias that may cause insignificance. (JEL Classification Codes: H22, H71, H72, H75)

Author

• Berube, Selene

Language

• English

Keyword

• Property tax
• Sales tax
• New Hampshire
• Taxes

Date created

• 2021

Type of Work

• Article

License

• All rights reserved

Rights statement

• In Copyright

GW Unit

• Student Organization

Persistent URL

•  https://scholarspace.library.gwu.edu/work/mg74qm94g

In Collection:

• The Capitol Economics Journal

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