Sorting Through The Property Tax Burden

By :: November 18th, 2013

When it comes to property taxes, location matters. In a new TPC report, my colleague Brian David Moore and I look at just how much property taxes vary across states and counties.

Using self-reported American Community Survey data, we find that residential property taxes tend to be close to $1,000 per year, with a small share of households paying substantially more, especially in Connecticut, New Jersey, New York and New Hampshire. In recent years, 48 percent of homeowners paid between $750 and $1,750 in property taxes. About one-third—31 percent—paid less than $750 and 21 percent paid more than $1,750.  Just 3 percent paid more than $4,000, with a miniscule share of homeowners (0.2 percent) paying more than $8,000.

These tax burdens vary by state and county. As shown below, seven states—Connecticut, Illinois, Massachusetts, New Hampshire, New Jersey, New York, and Rhode Island—had per household property tax collections in excess of $3,500. Five states—Alabama, Arkansas, Louisiana, Mississippi, and West Virginia—had per household property taxes of $750 or less. In dollar terms, property taxes tend to be highest in counties in the northeast and the west.

TaxVox

Click to Enlarge

The counties with the highest property taxes paid per homeowner are those surrounding New York City. Westchester, Nassau, and Bergen counties had the three highest average tax burdens, all in excess of $8,500; this in part reflects higher house prices and higher reliance on property taxes to provide state and local services. In general, the counties with the highest property tax burdens tend to be in New York and New Jersey, with all but three of the top 25 counties being from these two states.

Some of these differences are related to house prices, as rising housing values can increase property tax burdens. As a share of housing price, property tax burdens tend to be less than 1 percent—60 percent of homeowners fall into this group. An additional 37 percent of homeowners had property tax bills between 1 percent and 2 percent of their home’s value, and just 3 percent had property tax bills in excess of 2 percent.

Residents in all but fifteen states pay between 0.5 percent and 1.5 percent in taxes. Residents in four states pay less, while residents in 11 states pay more. The states with the highest average property tax burden as a share of housing price are New Jersey (2.0 percent), Texas (1.9 percent), and New Hampshire (1.9 percent).

Moving forward, the Tax Policy Center will regularly update these calculations as additional data become available.

8Comments

  1. Ralph H  ::  11:39 am on November 18th, 2013:

    Yikes, as a NJ resident I knew our taxes were really bad but this really highlights just how bad. Now if you could just highlight why ours is so bad. We also have a really high income and sales tax. One of the reasons Christie did so well is because he held line on income taxes and put caps in place on property taxes.

  2. Michael Bindner  ::  2:04 am on November 19th, 2013:

    Property taxes reflect two things – location – which is essentially the ability to pick your neighbors by pricing undesireables out of the market and the actual price of the home. A mansion in Kings Point or the Hamptons, or in Beverly Hills, is not available most places. Even a Land Value Tax won’t help things, precisely because the purpose of high value property and improvements is to price most people out of the neighborhood. That is why taxes are high but never high enough – nor can they be because Land Value Taxes are only on location, not improvement – and improvements are a part of class – probably a bigger part than land. In the end, of course, these taxes are a way to assure that only those with adequate income live in the neighborhood – so the payment of the tax can be linked to wages, especially for the rich and shameless on Wall Street or the entertainment or sports industries (question, is there a difference?).

  3. Warren Chamberlain  ::  9:02 am on November 19th, 2013:

    I do agree that property taxes as currently assessed and applied, are discriminatory relative to incomes, but they do reflect the relative value of the location of those residential properties and their proximity to income generating activities and educational resources.

    In my opinion, most suburban towns surrounding city centers are just dormitories for the public school system and even then, the property taxes on a single family home are revenue negative, if that home has two or more school age children in them.

    Since the public schools are largely supported by the local property tax this situation of revenue negativity is often offset by zoning laws that require larger house lots to restrict the growth in the school age population. This so called snob zoning just magnifies the problem buy enclosing more of the commons and making land in suburbia more scares and more valuable and expensive so only people with incomes high enough are able to afford the privilege of living in these towns and raising their children in pleasant surroundings and highly rated schools.

  4. Warren Chamberlain  ::  9:06 am on November 19th, 2013:

    I may add that the locations with the highest property taxes are more likely to have the best educational and municipal services available and if you wanted to find out where the most desirable location to live are just look at this map. Compare New Hampshire to Alabama for instance.

  5. Tax Roundup, 11/19/13: Sub-zero edition! And the dark side of non-recourse debt forgiveness. « Roth & Company, P.C  ::  10:08 am on November 19th, 2013:

    […] Ben Harris,  Sorting Through The Property Tax Burden (TaxVox): […]

  6. Warren Chamberlain  ::  2:42 pm on November 19th, 2013:

    I do believe that using the local property tax to publicly fund education is no longer as redistributive as it once was when you had rich and poor people living in the same town. Now we have rich towns and poor towns and not all towns are equal in their ability to properly fund a good educational program. The state of New Hampshire has mitigated this to some degree with a state wide property tax. All local property tax bills show a $2.00 per Thousand mil rate to be forwarded to the state government which redistributes that money to all the towns on a per-capita basis of the school age population. The State of New Hampshire has no state income or sales taxes.

  7. cas127  ::  5:31 pm on November 19th, 2013:

    “and if you wanted to find out where the most desirable location to live are just look at this map. Compare New Hampshire to Alabama for instance.”

    What would the political internet be, without liberal prejudice, posturing, and sneering?

    “Amazingly”, *millions* of people of all races *freely* choose to live in the cultural gulag of liberals’ fevered media-driven imaginations.

    But good luck freezing your *ss off.

  8. Pauly Onshore  ::  4:30 am on June 17th, 2014:

    I just started reading the original report this article was based upon. I applaud all involved for addressing property taxes for what they are, budensome and short sighted.

    From the original document:
    “For residential homeowners, the burden of the property tax is
    substantial, making up about one quarter of homeownership costs at the median
    homeownership duration (Harris 2013).”

    It is unclear what is meant therein. Is it to say homeowners on average are paying property taxes that are equivalent to 25% of their total homeownership costs?

    Factoring this for my current state of Pennsylvania where in 2013 the median house purchase price was $145,400…
    145400 / 100 = $1454/year in taxes at 1% rate of taxation to $2908 at 2% ceiling that 97% of taxpayers fall into nationally.

    If we take this range of $1454 floor and $2908 ceiling and call this 25% of said taxpayers total annual home ownership costs, we get:
    $5816 floor and $11632 ceiling

    The floor comes out to equal 12 month budget of $484.66.
    The ceiling comes out to equal 12 month budget of $969.33

    Both numbers appear SEVERELY low and perhaps erroneous. I realize we take into consideration those without mortgages, those with low winter heating loads, etc. on a national basis in this report.

    Using a mortgage calculator from Zillow.com for a $145,400 mortgage with 10% down and 4.5% interest we get the following:
    $64/mo PMI
    $67/mo insurance
    $663/mo P&I
    $145/mo taxes
    = $939 a month.

    Compare that to our 12 month equal budget floor and ceiling range of:
    The floor comes out to equal 12 month budget of $484.66.
    The ceiling comes out to equal 12 month budget of $969.33

    $939 is just $30 less than the budge. People with mortgages aren’t paying all the rest of their household expenses with that $30.

    This indicates that housing costs are when factored like this in the report, higher than is being reported or other statistical mass errors exist.

    This is in no way to discredit the underlying concept that property taxes are a large percentage of property owner annual spending.

    To this point, Pennsylvania is severely inadequate and disrespectful of taxpayers. There is great inequality and lack of uniformity in property taxation due to many decade lack of proper assessments. Some counties in the Commonwealth haven’t done a reassssment since the 1960’s.

    My own property in a down trodden urbanized shell of a town was wrongly assessed in recent years to be due property taxes in excess of $4500 a year for a property that at market, fair market long arm transaction would be lucky to fetch $25,000. Meaning the property taxes are 25%~ of marketable value per annum.

    I’ve appealed such taxation and received a reduction. However, as a percentage of the market value it’s still graphically above nearly anywhere.

    Sadly, if you take the time to sit in county records and leaf through the property sheets and piece things together, you will see similar insanity all over this country. You will see communities like my own cannibalized by burdensome taxation, properties forced sale due to fraudulent taxation and investors disinterested in such properties. Meaning great abandonment, forced demolition in mass, eventually and at great cost and burden to the already taxed off remaining tax payers.