Cities with the Highest Property Tax Rates: Understanding the Variations
Property taxes are a significant household expense that can vary based on several factors, according to research. These taxes, which typically support public services like education and emergency services, can be challenging to compare across jurisdictions. A recent report from the Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence highlights four key reasons for differences in property taxes: reliance on property taxes, property values, local spending, and classification.
Different communities have varying preferences when it comes to taxes and public amenities. Some communities may be willing to pay higher taxes for better public parks and transportation networks, while others prioritize lower taxes over additional amenities. It’s important to note that property taxes are a crucial source of local revenue, but each community has its own unique priorities and budgeting goals.
Richard Auxier, a senior policy associate at the Urban-Brookings Tax Policy Center, explains that property taxes may vary due to several variables, such as state restrictions on tax growth or relief programs for specific residents, like elderly, disabled, or veteran homeowners. These factors contribute to differences between neighbors’ property tax bills.
The report found that cities with high property tax reliance, low property values, and greater local government spending tend to have higher property tax rates. Effective tax rates, which indicate taxes as a percentage of a property’s market value, were analyzed for over 100 cities in the report. The calculations considered exemptions and credits as well.
The five cities with the highest effective property tax rates on a median-value home in 2022 were:
- Detroit: 3.21%
- Newark, New Jersey: 3.20%
- Aurora, Illinois: 3.04%
- Bridgeport, Connecticut: 3.04%
- Portland, Oregon: 2.59%
The report’s analysis also determined that the average effective tax rate for median-value homes in 2022 was 1.32% based on the largest city in each state.
It’s important to remember that high effective tax rates don’t necessarily equate to high property tax bills, as they can vary based on home values.
Overall, understanding the factors influencing property taxes can help individuals better comprehend the variations and make informed decisions regarding their own taxes.