States With The Lowest Property Taxes - Property taxes are the main source of income for states and the largest source of tax for localities. In the 2017 fiscal year, the most recent data available, property taxes were such a large source of local income that they accounted for 72.1 percent of local tax collections nationwide and 31.9 percent of US state and local tax collections, a larger share than another. source of tax revenue. In the same year, 26 states and the District of Columbia collected the largest share of combined state and local tax revenues from property taxes (see Table 8 in our Facts and Figures), with property taxes accounting for the largest share of local revenue but two states parts (Arkansas and Louisiana).
Various local political units—counties, cities, school boards, fire departments, utility commissions, to name a few—have the power to set property tax rates. Most taxing jurisdictions levy property taxes based on the fair market value of the property, while some base it on income potential (in the case of commercial property) or other factors. In addition, some states limit how much property tax rates can increase per year or set rate adjustments to achieve uniformity across the country.
States With The Lowest Property Taxes
New Hampshire and Alaska rely heavily on property taxes, accounting for 67.6 percent and 51.8 percent of their tax revenues in 2017, respectively. Alabama and Arkansas fall on the other end of the spectrum, raising the smallest share of state and local taxes. income through property taxes: 17.3 percent and 18.5 percent, respectively.
States With The Lowest Taxes In 2022
It is important to note that a high reliance on property taxes does not represent the total tax burden in any state. For example, while Alaska is one of the states with the highest dependence on property taxes, it is one of the states with the lowest collection of state and local per capita taxes (see Facts and Figures Table 6).
At the same time, states and localities that generate less income through property taxes are more dependent on general sales tax, personal income tax, corporate income tax, excise tax, and more, and state governments can take on more responsibility. to fund local government. or local schools.
Note: This map is part of a series in which we examine the main sources of state and local tax revenue.
Explore the weekly state tax map to see how your state tax rates, tax collections, and more.
New Jersey Had Highest Property Taxes Across The U.s. In 2016
A sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with minimal consumption. Many governments exclude items such as food. expanding the base, such as food products, can keep prices lower. Sales taxes should exempt business-to-business transactions, leading to a tax pyramid when taxed.
Property taxes are levied primarily on real property, such as land and buildings, as well as movable personal property, such as vehicles and equipment. Property taxes are the largest source of state and local revenue in the United States, supporting schools, roads, police, and other services.
Excise is a tax levied on certain goods or activities. Excise taxes are typically levied on tobacco, alcohol, soda, gasoline, insurance premiums, entertainment, and investments, and typically represent a relatively small and variable share of state and local, and to a lesser extent, federal tax collection.
Individual income tax (or personal income tax) is levied on wages, salaries, investments, or other types of personal or household income. The United States imposes a progressive income tax, where the rate increases with income. The federal income tax was established in 1913 with the ratification of the 16th Amendment. Despite being only 100 years old, personal income tax is the largest source of tax revenue in all 50 U.S. jurisdictions and the District of Columbia enforces property taxes. Most property tax revenues come from local levies (counties, municipalities, townships, school districts, and special districts) to improve land and improve it, but some states also impose taxes on personal property (such as machinery, equipment, and cars).
Property Taxes Hurt Low Income Mainers More Than Ever, But A Fix Won't Be Easy
While property taxes are an important source of local government revenue, they are a very small source of revenue for most states (Table 1). State governments collected $16 billion in property taxes in 36 states in 2017, or 1 percent of total revenue. .
Property taxes are the largest source of income for counties, cities, townships, school districts, and special districts, which are special purpose entities such as water bodies and sewers. The school district relies heavily on property taxes, collecting $212 billion in 2017, which is 83 percent of their total income. Since school districts receive intergovernmental transfers, their own sources account for less than half of total revenue (about 45 percent).
New Hampshire, which has no general income tax or general sales tax, relied the most on property taxes in 2017, with property tax revenues accounting for 49 percent of total state and local income. Property taxes also account for more than 30 percent of state and local income in Connecticut, Maine, New Jersey, Rhode Island, Texas, and Vermont. Alabama was the least dependent on property tax revenue in 2017, with only 10 percent of total state and local government revenue coming from taxes. Arkansas, Delaware, Hawaii, Kentucky, Louisiana, New Mexico, Oklahoma and West Virginia also collect less than 15 percent of state and local income from property taxes (Figure 1).
Looking at local governments alone, property taxes provided three-quarters of their income in Connecticut, Maine, Massachusetts, New Hampshire, New Jersey and Rhode Island in 2017. Alabama local governments received 20 percent of their own resources. property tax, the lowest percentage of any state.
Property Tax In The United States
At the state level, Vermont property taxes accounted for 26 percent of total state revenue in 2017, by far the highest percentage of any state. Nearly all of Vermont's education spending is funded at the state level, and the state property tax is the largest source of that funding. The next highest percentages are in Arkansas, New Hampshire and Wyoming, where property taxes are about 9 percent of gross income in each state. Wyoming's property tax revenues are relatively high in part because the state imposes taxes on mineral production.
Property taxes are also 5 percent or more of state income in Arizona, Kansas, Michigan, Montana, and Washington. State property taxes are often taxes on private property and land used for public utilities. Fourteen states do not levy state-level property taxes.
Effective property tax rates vary between states and across jurisdictions, making comparisons difficult. In addition to various statutory tax rates, local governments use different methods to calculate the real estate tax base.
Tax jurisdictions generally value real estate based on what it would sell for in a fair transaction. However, some jurisdictions base it on the final sale price or purchase price of the property, others consider the revenue the property can generate (for example, free space used for a hotel), and some rely on valuation. the size or physical attribute of the property (e.g., design, location). There is also variation in the timing of assessments, with some jurisdictions assessing annually and others more frequently.
State Tax Levels In The United States
Some jurisdictions impose a tax on the appraised value of the property (before deductions and credits). Others tax only part of the assessed value. For example, the county of South Carolina only taxes 4 percent of the value of the appraised property. Jurisdictions may impose different statutory tax rates ("classifications") for different types of property, usually distinguishing between residential and business properties.
Many states have imposed limits on property tax rates, property tax income, or increases in appraised property values, reducing reliance on property taxes as a source of income. California, for example, limits the tax rate to 1 percent, with an annual valuation increase of up to 2 percent until the property is sold. As a result, neighbors with similar properties may have different tax obligations depending on when they last changed hands.
State and local governments also often use limits, exclusions, deductions, and credits to reduce tax liability. Here are some examples:
Urban-Brookings Center on Tax Policy. State and Regional Financial Data: Calculating the Government. Washington, DC: Urban-Brookings Center on Tax Policy.
States Impose Sales Tax On Groceries
Harris, Benjamin H., and Brian David Moore. 2013. "Property Taxes in the United States." Washington, DC: Urban-Brookings Center on Tax Policy. The property tax component is 14.4 percent of each state's total
Property taxes are important to businesses for several reasons. First, businesses own most of the real estate, and commercial property tax rates are higher than comparable residential property rates. Many states and localities also levy taxes not only on land and buildings owned by a business, but also on tangible property such as machinery, equipment, and offices.
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