Paul L. Caron
Dean


Saturday, October 2, 2010

Tax Foundation Releases Property Tax Data

Tax Foundation logo The Tax Foundation has published New Census Data on Property Taxes on Homeowners, as well as a property tax lookup tool.  Here are links to specific charts:

Here are the Top 10 and Bottom 10 States in Median Real Estate Taxes Paid in 2009 -- all 10 states with the highest property taxes voted for Barack Obama in the 2008 election, and 9 of the 10 states with the lowest property taxes voted for John McCain:

Rank

State

Property Tax

1

New Jersey

$6,579

2

Connecticut

$4,738

3

New Hampshire

$4,636

4

New York

$3,755

5

Rhode Island

$3,618

6

Massachusetts

$3,511

7

Illinois

$3,507

8

Vermont

$3,444

9

Wisconsin

$3,007

10

California

$2,893

United States Average

$1,917

41

Tennessee

$933

42

New Mexico

$880

43

Kentucky

$843

44

Oklahoma

$796

45

South Carolina

$689

46

Arkansas

$532

47

Mississippi

$508

48

West Virginia

$464

49

Alabama

$398

50

Louisiana

$243

https://taxprof.typepad.com/taxprof_blog/2010/10/tax-foundation-.html

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Comments

Traditionally New Hampshire has had high property taxes as compared to many other states. But for the most part that's all we've had. There are no income or sales taxes and our overall tax burden is quite low compared to all other states.

It doesn't help that over the past 4 years our Democrat majority legislature has gone on a spending spree, but I think that's just about to change come November 2nd.

Posted by: DCE | Oct 2, 2010 9:13:34 AM

Do they take property values into account?
A 3br/2.5bath in MA costs much more the the same home in SC.
Maybe a tax/value percentage would be more accurate

Posted by: Ronald | Oct 2, 2010 9:58:08 AM

This is slightly disingenuous -- a ranking of taxes normalized to property value would have a rather different list. In such a list red-state Texas would be 3rd, red-state Nebraska would be 5th and blue-state California would be 33rd.

The list you have here is pretty much a list of expensive property at the top and cheap property at the bottom, and would seem to indicate property values are higher in blue states; not the argument you think you are making.

Posted by: Kevin M | Oct 2, 2010 10:23:47 AM

Professor the chart and conclusion appears to be misleading. Without the average appraised valuation for taxes and the millage applied the figures are not indicative of anything. More interesting comparison would be that of comparably appraised values among the various states and the taxes paid on those properties by state. In the case of CA you have the additional factor of prop 13 capping taxes so two homes with comparable values in the same taxing district could pay different amounts due to the time of purchase values.

Posted by: cubanbob | Oct 2, 2010 10:28:36 AM

this is excellent info. However, it doesn't tell the whole story. Texas has high property taxes but no income tax. I'd like to see total tax load by state also.

Posted by: Daddio | Oct 2, 2010 10:30:43 AM

I disagree with those who say you need to compare millage or tax-to-prop-value. The ultimate question is $ out of pocket. However, normalizing to tax as % of household income, or accounting for total state-tax burden, would also be valuable.

Posted by: Shelby | Oct 2, 2010 12:06:21 PM

Property tax alone doesn't tell the story. My property taxes in Hawaii are much lower than the property taxes I paid in Washington state. However, Hawaii has a truly onerous state income tax and Washington had none. How about a ranking by total taxes - avg per capita, property, sales, income and excise (and any other little gems I don't even know about...)

Posted by: Mercutio | Oct 2, 2010 12:40:00 PM

Time to get rid of property taxes altogether. It's the most unfair tax of all.
Market value is determined at the assessor's whim and the appeals process is rigged
by design against the property owner. propertytaxrights.com tells the real story on all of this.

Posted by: jessie T | Oct 2, 2010 4:42:15 PM

"Do they take property values into account? A 3br/2.5bath in MA costs much more the the same home in SC."

Taxable property values frequently do not accurately reflect true value in the bubble states. That's why mil rates will continue to increase in bubble states even those the fake values are collapsing.

Posted by: Lou Minatti | Oct 2, 2010 7:08:13 PM

"This is slightly disingenuous -- a ranking of taxes normalized to property value would have a rather different list. In such a list red-state Texas would be 3rd, red-state Nebraska would be 5th and blue-state California would be 33rd."

Meanwhile, red-states Nebraska and Texas are subsidizing blue-state (welfare queen) California to the tune of billions of dollars each year via the mortgage deduction subsidy. It's time to end this welfare for blue-state welfare queens.

Posted by: Lou Minatti | Oct 2, 2010 7:12:05 PM

Forbes did a story (Apr 14) ranking 200 US cities in terms of cost of doing business, projected job growth, and educational attainment. (Overall best: Des Moines, IA; worst: Merced, CA)

I did a "moving average" of rank vs red/blue state, and the trend in unmistakable. Red states end up at the high end, blue at the bottom. Five CA cities are in the bottom 10.

Posted by: ZZMike | Oct 2, 2010 10:21:31 PM

Any data on property tax as per cent of per capita income (along the same reasoning as in posts of Lou Minatti, below)?

Posted by: John Puma | Oct 3, 2010 6:25:06 AM

Tax as a percent of home value and tax as a percent of income are available on the website TaxProf linked to above: www.mytaxburden.org/propertytax

Posted by: Jeff | Oct 3, 2010 6:51:02 AM

I have taught a class in state and local taxes for the last eight years. I spend some time disabusing my students of the myth that rising property values increase property taxes.

Property Tax = tax rate x assessed value (which is somewhat realted to FMV).

But the Property Tax is definite dollar amount based on the projected municipal and school budget. If the assessed value increases, the tax (millage) rate decreases so that the result equals the projected budget.

Otherwise, if property values doubled (and spending stayed the same), the Property Tax would produce a 100% surplus each year. Income and sales taxes can rise or fall depending on the economy. But the Property Tax produces a sum certain regardless of the state of the economy. And regardless of the whether house prices (assessed values) are higher or lower.

The sum certain that is the local property tax is based on LOCAL SPENDING and not on assessed values. The fallacy that these rates need to be adjusted for the relative property values has been used to defend state and local spending. It sounds convincing as long as you don't know how the property tax actually works.

Presumably, those who post here do tax work for a living. That makes it even sadder. The general public can be forgiven for such mistakes far easier that a tax professional.

Posted by: Ed D | Oct 3, 2010 7:27:50 AM

Posted by: Mercutio | Oct 2, 2010 3:40:00 PM

Time to get rid of property taxes altogether. It's the most unfair tax of all.
Market value is determined at the assessor's whim and the appeals process is rigged
by design against the property owner. propertytaxrights.com tells the real story on all of this.

I would like to point out that property tax in the U.S. is a combination of two different taxes with completely different economic effects. The first part is a tax on improvements -- homes, pools, roads, and the like. This is definitely a bad tax, since it discourages new construction, expansion, and improvements to existing structures.

The second part is a tax on site value. This does not discourage production, since land (as a physical location on the earth's surface) is a fixed quantity -- dropping the tax on site value isn't going to encourage more land to form, nor will increasing it cause there to be less land. As long as the tax is below the rental value of the site, the site will remain in use. Because land is a fixed quantity, there is no deadweight loss from the tax, like you have with taxes on income, capital gains, or trade (sales taxes and VAT). Plus, land cannot be hidden in a Swiss bank account or bought on the black market, so tax evasion is much more difficult. Other than Pigovian taxes (taxes on negative externalities, like pollution), a land value tax is one of the fairest taxes around, and a lot easier to administer than sales and income taxes.

So I agree with half of your proposal -- by all means, get rid of the tax on structures and improvements to land -- but shifting the tax burden to the site value (called Land Value Taxation -- wiki link here: http://en.wikipedia.org/wiki/Land_value_tax ) and away from other taxes would go a fair way to making the economy more efficient, as well as preventing the next "housing" (really, land value) bubble.

Posted by: Michael | Oct 3, 2010 9:48:28 AM

I believe the first question our elected officials should ask when they take office is this: How much money in all tax revenue will we take in this year. From this point they can prioritize a list of required funding to meet current obligations and reduce or eliminate funding for other programs that we don't have the money for. We have to stop spending more than we take in now, not next year, or the next.

Posted by: Mike Johnston | Oct 3, 2010 8:56:48 PM