Lincoln Institute Study Compares Property Tax in 50 States

Cities seek balance in key revenue source for municipal fiscal health

May 26, 2015, 14:50 ET from Lincoln Institute of Land Policy

CAMBRIDGE, Mass., May 26, 2015 /PRNewswire-USNewswire/ -- The Lincoln Institute of Land Policy released the annual 50-State Property Tax Comparison Study, a comprehensive analysis of effective property tax rates in each state's largest city, one rural area in each state, and the District of Columbia.

The study, produced in partnership with the Minnesota Center for Fiscal Excellence, tracks the property tax as the primary revenue source to fund local government to provide basic services. The Northeast and Midwest generally have higher property tax burdens as compared to the West and Southwest.

In part because the study measures effective property tax rates – that is, the actual tax payment as a percentage of market value – many struggling post-industrial cities, where property values have dropped, show up at the top of the rankings.

"The property tax remains the foundation of sound municipal fiscal health," said George W. "Mac" McCarthy, president of the Lincoln Institute. Cities such as Detroit are working hard to make adjustments in valuations to bring balance back to this essential covenant, McCarthy said.

Bridgeport, Connecticut continues to impose the highest taxes on homes worth $150,000 to $300,000, followed by Detroit, Aurora, Ill., Newark, and Milwaukee. Cities with the lowest effective residential property tax rates include Denver, Birmingham, Washington D.C., Honolulu, and Boston.

Table 2:  Highest and Lowest Homestead Taxes Among Urban Cities for $150,000- and $300,000-Valued Homes, Payable 2014

Rank

(of 53)

$150,000

$300,000

City, State

Tax

City, State

Tax

1

Bridgeport, CT

$6,060

Bridgeport, CT

$12,120

2

Detroit, MI

$5,964

Detroit, MI

$11,929

3

Aurora, IL

$5,210

Aurora, IL

$11,106

4

Newark, NJ

$4,342

Newark, NJ

$8,683

5

Milwaukee, WI

$4,193

Milwaukee, WI

$8,599

49

Denver, CO

$994

Cheyenne, WY

$2,005

50

Birmingham, AL

$990

Denver, CO

$1,988

51

Washington, DC

$650

Washington, DC

$1,897

52

Honolulu, HI

$242

Boston, MA

$1,746

53

Boston, MA

$175

Honolulu, HI

$765

Cities with the highest apartment property tax rates – in contrast to "homestead" or owner-occupied housing – include New York, Detroit, Des Moines, Aurora, and Bridgeport.  The lowest in the rankings are Salt Lake City, Washington, D.C., Denver, Cheyenne, and Honolulu.

In terms of commercial property taxes, cities with the highest effective commercial rates include Detroit, New York, Chicago, Providence, Des Moines, and Bridgeport. The lowest taxes can be found in Wilmington, Del., Virginia Beach, Seattle, Honolulu, and Cheyenne.

Urban Cities with Highest and Lowest Commercial Property Taxes, Payable 2014

Rank

(of 53)

$100,000

$1,000,000

$25,000,000

City, State

Tax

City, State

Tax

City, State

Tax

1

Detroit, MI

$5,057

Detroit, MI

$50,574

Detroit, MI

$1,264,360

2

New York, NY

$4,760

New York, NY

$46,894

New York, NY

$1,189,931

3

Chicago, IL

$4,632

Chicago, IL

$46,323

Chicago, IL

$1,158,087

4

Providence, RI

$4,376

Providence, RI

$43,757

Des Moines, IA

$1,105,851

5

Bridgeport, CT

$4,098

Des Moines, IA

$43,385

Providence, RI

$1,093,931

49

Wilmington, DE

$1,320

Wilmington, DE

$13,199

Wilmington, DE

$329,984

50

Virginia Beach, VA

$1,173

Virginia Beach, VA

$11,726

Virginia Beach, VA

$293,155

51

Seattle, WA

$1,136

Seattle, WA

$11,358

Seattle, WA

$283,947

52

Honolulu, HI

$1,089

Honolulu, HI

$10,892

Honolulu, HI

$272,304

53

Cheyenne, WY

$831

Cheyenne, WY

$8,309

Cheyenne, WY

$207,719

Cities with the highest industrial property taxes are Columbia, South Carolina.,  Memphis, Jackson, Miss., and Houston. Cities with the lowest industrial property taxes are Cheyenne, Wilmington, Honolulu, and Virginia Beach.

The study is most useful when analyzed alongside other information about state and local tax structures, said Mark Haveman, executive director of the Minnesota Center for Fiscal Excellence. Some jurisdictions are more dependent on the property tax and have limited alternative options; some have higher income and sales taxes to finance a greater share of the cost of local government.

There are also many policies to redistribute property tax burdens across the classes of property through exemptions, differential assessment rates, or other classification schemes.

Other highlights:

Median-valued homes (urban)

  • Rates range from high of 4.0 percent (Bridgeport) to low of 0.3 percent (Honolulu)
  • Burdens range from high of $6,601 (Bridgeport) to low of $529 (Birmingham)

Effects of parcel-specific assessment limitations

  • The economic recovery appears to be creating additional amounts of excluded homestead value benefiting long time property owners
  • The effects can be very large –a new owner of the median valued home in New York City, Los Angeles and San Francisco pays 30 to 40 percent more in property taxes than the average tenured resident of the same home. 

Business property vs residential property taxes

  • Most property tax systems (42 of 53 in total) give residential property "preferred" status by imposing higher effective tax rates on business property through differential rates, differences in the proportion of value that is taxable, and/or credits or exemptions for homeowners
  • When comparing effective tax rates on land and buildings for commercial property valued at $1 million versus median-valued homes for 53 property tax systems, the effective tax rates on business property are 71 percent higher.
  • New York City and Boston are at the high end – each with effective tax rates for business property that are at least 4 times higher than those for residences.
  • States that tax homestead properties more heavily only do so because commercial properties are under-assessed relative to residences
  • States with no parcel-specific assessment limitations and low differentials between residential and business effective tax rates have had slower growth in property taxes.

The Lincoln Institute and the Minnesota Center for Fiscal Excellence have co-produced the 50-state comparison study for the last four years. The report released today, based on 2014 data, is available at the Lincoln Institute subcenter Significant Features of the Property Tax, which offers detailed data on the property tax in 50 states and the District of Columbia. Last year's report is available here.

The study can be used for further research on the dynamic impacts of property taxation, such as the extent to which commercial or industrial tax rates have an influence on locational decisions of businesses, or the relationship between tax rates and the proportion of untaxed or untaxable land in cities.

The Lincoln Institute of Land Policy is the leading resource for key issues concerning the use, regulation, and taxation of land. Providing high-quality education and research, the Lincoln Institute strives to improve public dialogue and decisions about land policy.

The Minnesota Center for Fiscal Excellence was founded in 1926 to promote sound tax policy, efficient spending, and accountable government. As a non-profit, non-partisan group supported by membership dues, the center pursues its mission by educating and informing Minnesotans about sound fiscal policy; providing state and local policy makers with objective, non-partisan research about the impacts of tax and spending policies; and advocating for the adoption of policies reflecting principles of fiscal excellence.

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SOURCE Lincoln Institute of Land Policy



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