Property Taxes

A Guide to Property Taxes

Foreword

The Guide to Property Taxes is a three-part series of property tax publications produced by the NCSL Foundation Fiscal Partners. The purpose of this Fiscal Partners project is to introduce policymakers to property taxes and the associated policy issues. Even though the property tax is largely a local tax, state law provides the power to impose it. In addition, state legislatures develop property tax policies that have major effects on local governments' ability to raise revenue and provide services. The first report provides an overview. It contains basic information about property taxes and how they are administered. The second of the series focuses on property tax relief policy. The third and final report will examine the role of property taxes in state and local finances. The three project reports are listed below:

• A Guide to Property Taxes: An Overview
• A Guide to Property Taxes: Property Tax Relief
• A Guide to Property Taxes: The Role of Property Taxes in State and Local Finances

Preface and Acknowledgments

Several members of the National Conference of State Legislatures' Foundation for State Legislatures convened in 1991 to discuss how they could assist in the development of sound state fiscal policy. They concurred that they could pool their resources to examine specific areas of state fiscal policy and then make recommendations on these state fiscal policy issues. This group, known as the Foundation Fiscal Partners, supports the NCSL Fiscal Affairs Program in an ongoing effort to improve the quality of fiscal information available to state policymakers.

One of the continuing goals of the Foundation Fiscal Partners Project is to improve dialogue among state legislators, business representatives, and other organizations that are interested in and affected by state fiscal policy. Basic information is an important tool for state policymakers who must make decisions about how best to generate revenue in this new economic environment. This Foundation Fiscal Partners Project, A Guide to Property Taxes, will provide solid comparative information to assist legislatures with those decisions.

Property taxes, which generally are not well understood, make up one of the most complex revenue systems used at the state and local levels. This project consists of three stand-alone reports that together provide a resource for policymakers and others. The three project reports are listed below.  

A Guide to Property Taxes: An Overview

The first product is an overview. This report examines the various types of taxable property and explains the mechanics of how property taxes are levied. It also examines various types of property and examines how states classify property and how they apply different assessment ratios.

Even though the property tax is largely a local tax, state law provides the power to impose it. In addition, state legislatures develop property tax policies that have major effects on local governments' ability to raise revenue and provide services. This report contains basic information about property taxes and how they are administered.

• An Overview is available to NCSL constituents in html and in pdf, and to the public through NCSL's book order department for $20.00.
• Table of Contents:
• Introduction
• The Property Tax
• History of the Property Tax
• Types of Taxable Property
• Determining the Tax Base
• Who Levies Property Taxes?
• How Property Taxes Work
• Other Valuation Methods
• Equalization
• Appeals
• Property Tax Limits
• Reliance on the Property Tax
• Property Tax Burdens
• Tax Treatment of Personal and Intangible Property, by State
• Property Classification, by State
• Tax Treatment of Agricultural Property, by State
• Property Taxes as a Percent of Total State and Local Revenue
• Total State and Local Taxes, FY 1999
• Notes

A Guide to Property Taxes: Property Tax Relief

States provide property tax relief to citizens in a number of different ways, and the number and type of relief has increased significantly in the past few years. The second report of the Foundation Fiscal Partners Project will discuss state relief efforts, including homestead exemptions, circuit breaker programs, tax deferrals and property tax freezes, among others.

Even though the property tax is largely a local tax, state law provides the power to impose it. State property tax policies are designed to offer property tax relief, which states providein a number of different ways. The number and type of relief mechanisms has increased significatnly during the late 1990s as states experienced consecutive years of surplus revenues. This report discusses state relief efforts, including homestead exemptions, circuitbreaker programs and tax deferrals, among others.

• Property Tax Relief is available to NCSL constituents in html and in pdf, and to the public through NCSL's book order department for $20.00.
• Table of Contents
• Introduction
• How Property Taxes Work
• Determining Taxable Value
• Determining the Tax
• The Role of the Legislature
• Taxable Property
• Local Revenue Structure
• Property Tax Relief for Residential Property
• Property Tax Relief for Agricultural Property
• Property Tax Relief for Business Property
• Property Tax Limits
• Tax Rate Limits
• Assessment Limits
• Revenue Rollbacks
• Expenditure Limits
• Property Tax Freeze
• Conclusion
• Notes

A Guide to Property Taxes: The Role of Property Taxes in State and Local Finance

During the past decade, the relationship between property taxes and state and local government services has changed significantly. Years of surplus revenue, coupled with voter dislike of the property tax, has resulted in major property tax cuts and has led states to shoulder a growing share of education costs. In addition, a number of states rely heavily on businesses and personal property to provide a large portion of property tax revenue. Sometimes, these taxes are not very straightforward or obvious. This report will examine some of these issues.

• The Role of Property Taxes in State and Local Finance is available to NCSL constituents in html and in pdf, and to the public through NCSL's book order department for $20.00.
• Table of Contents
• Foreword
• Preface and Acknowledgments
• Participating Legislators and Legislative Staff
• Representatives of the Foundation Fiscal Partners
• Introduction
• State-Local Revenue Relationships
• State-Local Reliance on Three Major Taxes
• Total Revenue Mix
• How Reliance on the Property Tax Is Changing
• Most Significant Local Tax
• Pressures on the Property Tax
• Opposition
• Market Forces
• Exemptions
• Responses to Pressures on the Property Tax
• Limits
• Procedural Improvements
• State Aid
• Diversification
• Implications of a Property Tax Shift
• Property Taxes and Public School Funding
• State Examples
• Notes
• References

A Guide to Property Taxes is the sixth Foundation Fiscal Partners Project. Previous Foundation Fiscal Partners Project publications include:

Participating Legislators and Legislative Staff

Representatives of the Foundation Fiscal Partners

• American Federation of Teachers: Ed Muir and Bill Tammelleo
  
• International Council of Shopping Centers: Herbert Tyson
  
• NCSL Foundation for State Legislatures: Caroline Carlson
  
• National Education Association: Janis Hagey and Ed Hurley
  
• Philip Morris Management Corporation: Pam Inmann and Michael Stojsavljevich

Mandy Rafool is the principal author of this report, with contributions by Judy Zelio. Corina Eckl and Leann Stelzer provided valuable editing advice, Anabliss Design designed the cover, and Lisa Houlihan prepared the report for publication.

The author also would like to acknowledge former NCSL staff member Scott Mackey, who originally wrote some of the text. Special thanks go to the funding partners for their generous support and the legislative partners for their insight and contributions.

Other NCSL information about property taxes on-line:

• The Property Tax: More or Less?, a presentation at NCSL's 2004 Annual Meeting by Gary Cornia of Brigham Young University and Dwight Denison of New York University
• An article in State Policy Reports on state and local tax collections gives state and local property taxes per capita for FY 1997.
• Four articles in State Budget & Tax News discuss property taxes (members-only access):
  • New Hampshire Imposes State Property Tax-Again (November 1999)
  • Property Tax Relief (February 2000)
  • Property Tax Reform Bandwagon: Next Stop Alaska? (July 2000)
  • State Taxes on Real Property (May 2001)

Updated August 2004.
Email statetax-info@ncsl.org for more information.
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Contents

• A Guide to Property Taxes
  • Foreword
  • Preface and Acknowledgements
  • Participating Legislators and Legislative Staff
  • Representatives of the Foundation Fiscal Partners
• A Guide to Property Taxes: An Overview
• A Guide to Property Taxes: Property Tax Relief
• A Guide to Property Taxes: The Role of Property Taxes in State and Local Government
• Other Information on Property Taxes