Another Top-10 List — Highest Property Taxes on Houses by State

While most homes in the U.S. have ad valorem property tax bills of less than $1,000 per year and below 1 percent of their corresponding market value, that is not true for many states. In Texas, for example, since there is no state income tax, schools are funded primarily from property taxes. Most states and locales rely on a mix of income sales and property taxes for funding. Some states simply have larger government services requiring greater funding and some less.

Researchers at the Urban-Brookings Tax Policy Center completed a study late in 2013 analyzing the incidence of residential property taxes and related tax burden. They note in the review of prior research and findings that:

  • Property taxes make up one-quarter of homeownership costs at the median duration of the ownership period
  • Property taxes are the source for 34.6 percent of local revenues
  • Property taxes account for 63.9 percent of local-own source revenues

The researchers examined the data accumulated from the American Community survey http://www.census.gov/acs/www/ They included only counties with populations in excess of 65,000 and weighted the summary statistics for each state median by the respective number of houses in each county included in the analyses.

So which states have the highest property taxes as a percentage of home value?

1-3-14 graph1

Where are the lowest tax rates?

1-3-14 graph2

The variance in property taxes as a percentage of value from the least to the most, as can be seen in the two prior tables, is almost a factor of 100. Exemptions, state laws, other tax sources, local practices, fractional assessments (where a property tax is based on just a percentage of the appraised value) and classified states (where differing property types have differing tax rates) explain some of the variability.

To read the entire report click http://www.taxpolicycenter.org/stateandlocal/tax-and-budget/Revenues-and-taxation.cfm

In property taxes there are always three facets to focus on.

  • Is the assessed value of the property correct?
  • The tax rate is a function of laws and needs. When property values decline and ad valorem property tax collections drop, unless the local or state government cuts spending at the same rate, they face increasing the actual tax rate collected. The same is true in a rising value environment. The actual tax rate is usually not arguable, except at the polls when electing government officials.
  • Equalization. Equalization is a concept in taxation where, regardless of the value of the property, is the subject property paying more taxes than similar properties in the same market.

Perhaps the best perspective in taxes is the infamous Benjamin Franklin quote, “In this world nothing can be said to be certain, except death and taxes.” While I am certain death is pretty much the same in every state, be aware that taxes are not.
Ted

Comments

  1. Wade Hampton Sr

    Very interesting and little know piece of information.

  2. Cj Yeoman

    Congrats, Dr. Ted, on making Stefan Swanepoel’s new “Power 200″ list!

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