11 Property Taxes

A tax on the market value of privately owned property is called a property tax. In this chapter, we define what property taxes are and outline the administrative steps to collect them. An important difference compared to the previous taxes is that the government sets the tax base and the tax rate. Hence, we first cover property value determination and assessment and then the tax rate setting. The final sections of this chapter cover various measures related to equity and policy as well as the evaluation (e.g., equity, efficiency). There are also slides and a YouTube video associated with this chapter.

Property taxes are theoretically taxes on wealth (e.g., real estate, personal property). The inclusion of all property is administratively and politically not feasible. Thus, it is usually limited to agricultural land, commercial and industrial property, and residential homes. Some properties are exempt (e.g., public properties, cemeteries, churches, colleges, nonprofit hospitals) as long as those are used for the intended purpose. Property taxes are the most important tax used by U.S. local governments (Source: U.S. Census 2021 State & Local Government Finance Historical Datasets and Tables) and represent 72.5% of local tax revenue and are the economic basis for local autonomy.