Property taxes are the primary tool for financing local government and generating state-level revenue in some states as well. In fiscal year 2020, property taxes comprised 32.2 percent of total state and local taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. collections in the United States, more than any other source of tax revenue. Local governments rely heavily on property taxes to fund schools, roads, police departments, fire and emergency medical services, as well as other services associated with residency or property ownership. Property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. es accounted for 72.2 percent of local tax collections in fiscal year 2020.
Because property taxes are locally levied, providing a useful state-level comparison can be difficult. So, in an effort to present a multifaceted view, today’s blog features two maps focused on the property tax. The first looks at median property tax bills in each county in the United States, and the second compares effective property tax rates across states.
Median property taxes paid vary widely across (and within) the 50 states. The lowest bills in the country are in six counties or county equivalents with median property taxes of less than $200 a year:
- Northwest Arctic Borough and the Kusivlak Census Area (Alaska)*
- Avoyelles, East Carroll, and Madison (Louisiana)
- Choctaw (Alabama)
(*Significant parts of Alaska have no property taxes, though most of these areas have such small populations that they are excluded from federal surveys.)
The next-lowest median property tax of $201 is found in Allen Parish, near the middle of Louisiana, followed by $218 in McDowell County, West Virginia, in the southernmost part of the state.
The eight counties with the highest median property tax payments all have bills exceeding $10,000:
- Bergen, Essex, and Union (New Jersey)
- Nassau, New York, Rockland, and Westchester (New York)
- Falls Church (Virginia)
All but Falls Church are near New York City, as is the next highest, Passaic County, New Jersey ($9,999).
Where Do People Pay the Most in Property Taxes?
Median Property Taxes Paid by County, 2020 (5-year estimate)
Note: Missing values are due to small sample sizes in low-population counties. This interactive map is more accessible when viewed on larger screens. Source: U.S. Census Bureau, 2020 American Community Survey dataset B25103.
Below is a shareable version of the interactive map shown above.
Property tax payments also vary within states. In Georgia, for example, where the median property tax bill is relatively low, median taxes range from $413 in Quitman County (near the Alabama border in the southern part of the state) to $3,185 in Fulton County (a suburb of Atlanta). This is typical among states; higher median payments tend to be concentrated in urban areas. This is partially explained by the prevalence of above-average home prices in urban cities. Because property taxes are assessed as a percentage of home values, it follows that higher property taxes are paid in places with higher housing prices. However, because millages—the amount of tax per thousand dollars of value—can be adjusted to generate the necessary revenue from a given property tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. , the higher payments also reflect an overall higher cost of government—and commensurately higher taxes—in these areas.
While no taxpayers in high-tax jurisdictions will be celebrating their yearly payments, it’s worth noting that property taxes are largely rooted in the “benefit principle” of government finance: the people paying the property tax bills are most often the ones benefiting from the services.
Because the dollar value of property tax bills often tracks with housing prices, it can be difficult to use this measure to compare between states. Further complicating matters, rates don’t mean the same thing from state to state, or even county to county, because the millage is often imposed only on a percentage of actual property value, as is discussed below. However, one way to compare is to look at effective tax rates on owner-occupied housing—the average amount of residential property taxes actually paid, expressed as a percentage of home value.
In calendar year 2020 (the most recent data available), New Jersey had the highest effective rate on owner-occupied property at 2.21 percent, followed by Illinois (2.05 percent) and New Hampshire (1.96 percent). Hawaii was at the other end of the spectrum with the lowest effective rate of 0.31 percent, followed closely by Alabama (0.39 percent) and Louisiana (0.54 percent).
Governments tax real property in a variety of ways: some impose a millage on the fair market value of the property, while others impose it on a percentage (the assessment ratio) of the market value. While values are often determined by comparable sales, jurisdictions also vary in how they calculate assessed values. While property taxes tend to be imposed at the local level, their basic framework is typically set by state law.
Some states have equalization requirements, ensuring uniformity across the state. Sometimes property tax limitations restrict the degree to which one’s property taxes can rise in a given year, and sometimes rate adjustments are mandated after assessments to ensure uniformity or revenue stability. Abatements (i.e., reductions or exemptions) are often available to certain taxpayers, like veterans or senior citizens. And of course, property tax rates are set not only by cities and counties, but also by school boards, fire departments, and utility commissions.
Some states with high property taxes, like New Hampshire and Texas, rely heavily on them in lieu of other major tax categories. This often involves greater devolution of authority to local governments, which are responsible for more government services than they are in states with greater reliance on state-level revenues. Other states, like New Jersey and Illinois, impose high property taxes alongside high rates in the other major tax categories.
How does your state compare?
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