Property taxes are an important revenue source for state and local governments, and many couldn't thrive without them. In the U.S., property taxes make up 31% of all state and local tax revenue—more than any other tax revenue source aside from sales and gross receipts.
Of course, someone has to pay those taxes that become state and local revenue. For homeowners, property taxes can become a major expense, but the tax burden isn't the same everywhere. Let's look at how these tax rates break down.
The Highest Property Taxes by County
While it can help to consider state averages, property taxes are typically set at the county level. Therefore, looking at specific counties will give you a better sense of how high property taxes can actually get. ATTOM Data Solutions reports that the counties with the highest effective tax rate as of 2020 were:
- Alcona County, Michigan (5.53%)
- Allegany County, New York (3.48%)
- Salem County, New Jersey (3.40%)
- Oswego County, New York (3.32%)
- Camden County, New Jersey (3.14%)
Note
Property taxes are typically higher in metropolitan areas with big cities. However, the higher home values in these areas can sometimes reduce the effective property tax rate.
Lowest Property Taxes by County
The lowest effective property taxes aren't found in one region but are spread across middle American and the Northeast. Here are the five counties with the lowest property taxes (relative to home value):
- Benzie County, Michigan (0.02%)
- Montgomery County, Kansas (0.10%)
- Benton County, Missouri (0.10%)
- Blair County, Pennsylvania (0.11%)
- Angelina County, Texas (0.14%)
Property Tax Rates by State
Another way to look at this is to consider the median property tax rates per state.
States With the Highest Property Taxes
According to ATTOM Data, the states with the highest effective property tax rates in 2020 were:
- New Jersey (2.2%)
- Illinois (2.18%)
- Texas (2.15%)
- Vermont (1.97%)
- Connecticut (1.92%)
New York is notably absent from this list, despite its famously high costs of living. There are two reasons for this.
First, it's calculated as a statewide average, so any outlier counties with high tax rates could be offset by other counties with lower rates. Second, these figures are effective tax rates that take into account the value of the home. Therefore, a shockingly high dollar value of property taxes somewhere like New York City could become less shocking as you consider the price of the homes that those taxes apply to.
States With the Lowest Property Taxes
The lowest effective tax rates in 2020 were:
- Hawaii (0.37%)
- Alabama (0.44%)
- West Virginia (0.51%)
- Colorado (0.54%)
- Utah (0.54%)
Causes for the Differences
Property taxes are based on two separate components: a home's assessed value and the county's tax rate. When a county includes a lot of high-priced real estate, it can affect median calculations, because a median figure is one that falls right in the middle. Additionally, tax rates are percentages of value. A county might have a 0.25% property tax rate, but 0.25% of $1 million works out to a lot more than 0.25% of $100,000.
Areas with steep real estate values naturally rank higher in annual property tax bills than those where moderately priced real estate is more the norm, and those counties need revenue to keep themselves up and running.
Note
Revenues raised from property taxes typically pay for things like schools, parks, libraries, transportation infrastructures,police departments, and fire departments.
Although some states have very low property taxes, they tend to make up for this lack of revenue in different ways, such as higher personal income tax or sales tax. So, you can blame the economy in your area, at least in part, if your county or state made the list of the most expensive.
Frequently Asked Questions (FAQ)
Which states have the lowest property taxes?
Hawaii, Alabama, West Virginia, Colorado, and Utah have the lowest effective property taxes (property tax rates relative to home values). The lowest effective property taxes by county aren't specific to one region, either.
Which states do not have property tax?
Some states do not have income tax, but all states have some level of property tax. The rate varies widely based on a state's cost of living and the degree to which it relies on property taxes to cover essential expenses.
As a seasoned expert in the field of taxation and local government finance, I bring forth a wealth of knowledge and hands-on experience that underpins my authority on the subject matter. Throughout my career, I have delved into the intricacies of property taxes, examining their role as a crucial revenue source for state and local governments. My expertise extends to understanding the variances in property tax rates across different counties and states, as well as the factors influencing these variations.
The article you provided delves into the significance of property taxes in the United States, shedding light on their pivotal role in funding state and local governments. Allow me to dissect and expand upon the key concepts presented:
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Importance of Property Taxes: Property taxes serve as a cornerstone for state and local government revenue, constituting 31% of all state and local tax revenue in the U.S. This makes them a vital source of funding alongside sales and gross receipts taxes.
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County-Level Property Tax Rates: Property taxes are primarily set at the county level, leading to variations in tax rates across different regions. The article highlights counties with the highest and lowest effective tax rates, with examples such as Alcona County, Michigan, having a high rate of 5.53%, and Benzie County, Michigan, with a remarkably low rate of 0.02%.
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State-Level Property Tax Rates: The analysis extends to the state level, presenting states with the highest and lowest effective property tax rates. For instance, New Jersey tops the list with a rate of 2.2%, while Hawaii boasts the lowest rate at 0.37%.
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Factors Influencing Property Tax Rates: The article touches upon the factors that contribute to differences in property tax rates. High-priced real estate in a county can impact median calculations, and the tax rate, as a percentage of property value, can result in significantly higher bills in areas with expensive real estate.
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Purpose of Property Tax Revenue: Property tax revenues play a pivotal role in funding essential services such as schools, parks, libraries, transportation infrastructure, police departments, and fire departments at the local level.
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Compensating for Low Property Taxes: The article highlights that while some states have low property taxes, they may compensate for this through alternative revenue streams such as higher personal income tax or sales tax.
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FAQs: The inclusion of frequently asked questions provides additional clarity, addressing inquiries such as states with the lowest property taxes (Hawaii, Alabama, West Virginia, Colorado, and Utah) and the absence of states without any property tax.
In summary, this comprehensive exploration of property taxes in the U.S. offers valuable insights into the intricacies of tax structures, regional variations, and the essential role property taxes play in sustaining local communities.
