50-State Property Tax Comparison (2023)

JULY 2024 50-State Property T ax Comparison Study For T axes Paid in 2023 50-State Property Tax Comparison Study, Copyright © July 2024 Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence This book may not be reproduced in whole or in part without written permission from Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence.

Lincoln Institute of Land Policy Department of Valuation and Taxation 113 Brattle Street Cambridge, MA 02138 (617) 661-3016 Minnesota Center for Fiscal Excellence 85 East 7th Place, Suite 250 Saint Paul, Minnesota 55101 (651) 224-7477 Cover image: © iStockphoto/zrfphoto Acknowledgments This report would not have been possible without the cooperation and assistance of many individuals. Research, calculations, and drafting were done by Bob DeBoer2 and Adam H. Langley.1 Copy editing was done Amy Finch1 and the cover was designed by Leigh Mantoni-Stewart.1 The report benefits greatly from the architecture and design provided by Aaron Twait,2 and feedback from Anthony Flint,1 Mark Haveman,2 Will Jason,1 Daphne A. Kenyon,1 George W. McCarthy,1 Emily McKeigue,1 Semida Munteanu,1 Andrew Reschovsky,1 and Joan M. Youngman.1 1 Lincoln Institute of

Land Policy 2 Minnesota Center for Fiscal Excellence About the Lincoln Institute of Land Policy The Lincoln Institute of Land Policy seeks to improve quality of life through the effective use, taxation, and stewardship of land. A nonprofit private operating foundation whose origins date to 1946, the Lincoln Institute researches and recommends creative approaches to land as a solution to economic, social, and environmental challenges. Through education, training, publications, and events, we integrate theory and practice to inform public policy decisions worldwide.

About the Minnesota Center for Fiscal Excellence The Minnesota Center for Fiscal Excellence was founded in 1926 to promote sound tax policy, efficient spending, and accountable government.

We pursue this 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 • advocating for the adoption of policies reflecting principles of fiscal excellence.

MCFE generally defers from taking positions on levels of government taxation and spending believing that citizens, through their elected officials, are responsible for determining the level of government they are willing to support with their tax dollars. Instead, MCFE seeks to ensure that revenues raised to support government adhere to good tax policy principles and that the spending supported by these revenues accomplishes its purpose in an efficient, transparent, and accountable manner.

The Center is a non-profit, non-partisan group supported by membership dues. For information about membership, call (651) 224-7477, or visit our web site at www.fiscalexcellence.org.

50-State Property Tax Comparison Study For Taxes Paid in 2023 Table of Contents Executive Summary ................................ ................................ ................................ .................

1 Introduction ................................ ................................ ................................ ...........................

6 Why Property Tax Rates Vary Across Cities ................................ ................................ ................

9 Homestead Property Taxes ................................ ................................ ................................ .... 15 Commercial Property Taxes ................................ ................................ ................................ ... 22 Industrial Property Taxes ................................ ................................ ................................ ....... 27 Apartment Property Taxes ................................ ................................ ................................ ...... 32 Classification and Preferential Treatment of Homestead Properties ................................ .......... 35 Property Tax Assessment Limits ................................ ................................ .............................

42 Methodology ................................ ................................ ................................ ........................

45 Appendix Tables 1. Why Property Tax Rates Vary Across Cities 1a. Factors Correlated with Homestead Property Tax Rates in Large US Cities .........................

54 1b. Factors Correlated with Commercial Property Tax Rates in Large US Cities .......................

57 1c. Correlates of Cities’ Effective Tax Rates on Homestead Properties................................ .... 60 1d. Correlates of Cities’ Effective Tax Rates on Commercial Properties ................................ .. 61 2. Homestead Property Taxes 2a. Largest City in Each State: Median Valued Homes ................................ ...........................

62 2b. Largest City in Each State: Median Valued Homes, with Assessment Limits .......................

64 2c. Largest City in Each State: Homes worth $150,000 and $300,000 ................................ ...... 66 2d. Largest 50 US Cities: Median Valued Homes ................................ ................................ ... 68 2e. Largest 50 US Cities: Median Valued Homes, with Assessment Limits ...............................

70 2f. Largest 50 US Cities: Homes worth $150,000 and $300,000 ................................ ..............

72 2g. Selected Rural Municipalities: Median Valued Homes ................................ ......................

74 2h. Selected Rural Municipalities: Homes worth $150,000 and $300,000 ................................

76 3. Commercial Property Taxes 3a. Largest City in Each State ................................ ................................ ..............................

78 3b. Largest 50 US Cities ................................ ................................ ................................ ..... 80 3c. Selected Rural Municipalities ................................ ................................ ........................

82 4. Industrial Property Taxes 4a. Largest City in Each State (Personal Property = 50% of Total Parcel Value) .........................

84 4b. Largest City in Each State (Personal Property = 60% of Total Parcel Value) .........................

86 4c. Largest 50 US Cities (Personal Property = 50% of Total Parcel Value) ................................ . 88 4d. Largest 50 US Cities (Personal Property = 60% of Total Parcel Value) ................................ . 90 4e. Selected Rural Municipalities (Personal Property = 50% of Total Parcel Value) ...................

92 4f. Selected Rural Municipalities (Personal Property = 60% of Total Parcel Value) ....................

94 4g. Preferential Treatment of Personal Property, Largest City in Each State .............................

96 5. Apartment Property Taxes 5a. Largest City in Each State ................................ ................................ ..............................

98 5b. Largest 50 US Cities ................................ ................................ ................................ ... 100 5c. Selected Rural Municipalities ................................ ................................ ......................

102 6. Classification and Preferential Treatment of Homestead Properties 6a. Commercial-Homestead Classification Ratio for Largest City in Each State .....................

104 6b. Apartment-Homestead Classification Ratio for Largest City in Each State .......................

106 7. Impact of Assessment Limits ................................ ................................ ............................

108 1 Executive Summary As the largest source of revenue raised by local governments, a well-functioning property tax system is critical for promoting municipal fiscal health. This report documents the wide range of property tax rates in more than 100 US cities and helps explain why they vary so widely. This context is important because high property tax rates usually reflect some combination of 1) heavy property tax reliance with low sales and income taxes, 2) low home values that drive up the tax rate needed to raise enough revenue, or 3) higher local government spending and better public services.

In addition, some cities operate in an environment where the state uses property tax classification, which can result in considerably higher tax rates on business and apartment properties than on homesteads.

This report provides the most meaningful data available to compare cities’ property taxes by calculating the effective tax rate: the tax bill as a percent of a property’s market value. Data are available for 74 large US cities and a rural municipality in each state, with information on four different property types (homestead, commercial, industrial, and apartment properties), and statistics on both net tax bills (i.e., $3,000) and effective tax rates (i.e., 1.5 percent). These data have important implications for cities because the property tax is a key part of the package of taxes and public services that affects cities’ competitiveness and quality of life.

Why Property Tax Rates Vary Across Cities To understand why property tax rates are high or low in a particular city, it is critical to know why property taxes vary so much across cities. This report uses statistical analysis to identify four key factors that explain most of the variation in property tax rates.

Property tax reliance is one of the main reasons why tax rates vary across cities. While some cities raise most of their revenue from property taxes, others rely more on alternative revenue sources.

Cities with high local sales or income taxes do not need to raise as much revenue from the property tax, and thus have lower property tax rates on average. For example, this report shows that Bridgeport (CT) has one of the highest effective tax rates on a median valued home, while Birmingham (AL) has one of the lowest rates. However, in Bridgeport, city residents pay no local sales or income taxes, whereas Birmingham residents pay both sales and income taxes to local governments. Consequently, despite the fact that Bridgeport has much higher property taxes, total local taxes are nearly 50 percent higher in Birmingham ($3,372 vs. $2,375 per capita).

Property values are the other crucial factor explaining differences in property tax rates. Cities with high property values can impose a lower tax rate and still raise at least as much property tax revenue as a city with low property values. For example, consider San Francisco and Detroit, which have the highest and lowest median home values in this study. After accounting for assessment limits, the average property tax bill on a median valued home for the large cities in this report is 2 $3,795. To raise that amount from a median valued home, the effective tax rate would need to be more than 16 times higher in Detroit than in San Francisco—4.54 percent versus 0.28 percent.

Two additional factors that help explain variation in tax rates are the level of local government spending and whether cities tax homesteads at lower rates than they tax other types of property (referred to as “classification”). All else equal, cities with higher spending will need to have higher property tax rates. Classification imposes lower property taxes on homesteads, but higher property taxes on business and apartment properties.