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Property taxes can have a significant impact on households’ finances, and various factors can influence the size of the tax bill, according to research.
Comparing property taxes across different jurisdictions can be challenging due to several reasons, including the reliance on property taxes, variations in property values, local spending, and classification. This information comes from a new report published by the Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence.
“Different communities have varying preferences when it comes to property taxes,” said Katherine Loughead, a senior policy analyst at the Tax Foundation’s Center for State Tax Policy. “Some communities are willing to pay higher taxes in exchange for better public amenities like parks and transportation, while others prioritize lower taxes.”
Loughead emphasizes that property taxes are a crucial local revenue source but notes that each community has its unique priorities and budgeting goals.
Understanding the Complexity of Property Taxes
“Property taxes may seem straightforward, but they are influenced by numerous factors,” explained Richard Auxier, senior policy associate at the Urban-Brookings Tax Policy Center. “There are countless variables at play.”
For instance, some states impose restrictions on property tax growth or offer relief programs for specific groups such as elderly, disabled, or veteran homeowners.
This explains why your neighbor’s property tax bill can differ significantly from yours, as Auxier pointed out, “Adjusting various factors leads to different outcomes.”
The report reveals that generally, cities with high reliance on property taxes, low property values, or higher local government spending tend to have higher property tax rates.
The report studied the “effective tax rate,” which represents taxes as a percentage of a property’s market value, for over 100 cities to gain insights into these variations. The calculations also considered exemptions and credits.
Cities with the Highest Property Tax Rates in 2022
Detroit skyline
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The following cities have the highest effective property tax rates for a median-valued home in 2022:
- Detroit: 3.21%
- Newark, New Jersey: 3.20%
- Aurora, Illinois: 3.04%
- Bridgeport, Connecticut: 3.04%
- Portland, Oregon: 2.59%
Based on the report’s analysis of the largest city in each state, the average effective tax rate for median-value homes was 1.32% in 2022.
It’s worth noting that cities with high effective tax rates can still have relatively low property tax bills due to variations in home values. For example, Los Angeles and Wichita, Kansas have similar effective tax rates of around 1.16%, but Los Angeles homeowners face significantly higher property tax bills due to the city’s higher median home values.
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