THE PROPERTY TAX AND PUBLIC EDUCATION FUNDING
Click here to access the Compendium.
PREFACE: This compendium was crafted specifically for those interested in public education funding resources; the property tax is a large (although shrinking) source of those funds. Statewide property taxes, assessment rates, and homestead exemptions were chosen because they play a large role in the collection of, or drain on, property tax revenues. Following is a note on the three issue areas:
(1) STATEWIDE PROPERTY TAXES: For the purposes of this compendium, unless otherwise noted, the only statewide property taxes discussed are those taxes levied on personal real property. Statewide taxes levied on utility, oil and gas, mining, transportation, etc., properties usually are not included.
(2) ASSESSMENT RATES: Because assessment rates are typically prescribed by state constitutional or statutory provisions, and because they play a large role in determining the final revenue amount generated by a property tax levy, they are included in this compendium. Millage rates are not included because mill rates are typically determined on a local level, and they typically change from tax year to tax year.
(3) HOMESTEAD EXEMPTIONS: State legislatures grant a number of property tax exemptions. Common among them is the homestead exemption, which is typically granted to senior citizens, people with disabilities, veterans, or those living in or near poverty. In some instances, however, the homestead exemption is a blanket exemption enjoyed by all owners of real property over which the grantor state claims situs; these blanket exemptions usually are expressed as a reduced assessment rate. Click here to view a table of homestead exemptions available to veterans.
CALCULATING THE EFFECTIVE PROPERTY TAX RATE: The effective property tax rate is the amalgamation of all the variables (i.e., assessment values, assessment ratios, millage rates, etc.) that go into determining the final dollar amount a property owner must pay to a taxing jurisdiction.
Following is an example of how varying assessment and millage rates across jurisdictions can still arrive at the same effective tax rate for similarly valued pieces of property. In the following example, assume that both tracts of real property are assessed according to their fair market value and, though located in different states, have a comparable value of $200,000:
| || |
| || State 1 || State 2|
| Assessed value: || $200,000 || $200,000|
| Assessment ratio: || 100% || 75%|
| New assessed value: || $200,000 || $150,000|
| Mill rate: || 22.5 mill || 30.0 mills|
| Tax due: || $5,000 || $5,000|
| Effective tax rate: || 2.5% || 2.5% || |
As demonstrated in the example above, while the assessment rates vary between the two states, a difference in mill rates can produce two similar effective tax rates.
The following sources were referenced to compile this compendium:
- CCH Inc., 2005 U.S. Master Property Tax Guide. Chicago, Ill.: CHH Incorporated 2005.
- National Conference of State Legislatures. A Guide to Property Taxes: An Overview. Denver, Colo.: National Conference of State Legislatures, 2002.
- National Conference of State Legislatures. A Guide to Property Taxes: Property Tax Relief. Denver, Colo.: National Conference of State Legislatures 2002.
- National Conference of State Legislatures. A Guide to Property Taxes: The Role of Property Taxes in State and Local Finances. Denver, Colo.: National Conference of State Legislatures 2004.
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