50-State Property Tax 50-State Property Tax

Comparison StudyComparison Study

FOR TAXES PAID IN 2020FOR TAXES PAID IN 2020

JUNE 2021

50-State Property Tax Comparison Study, Copyright © June 2021

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

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Lincoln Institute of Land Policy

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Cover image: © iStockphoto/Aneese

Acknowledgements

This report would not have been possible without the cooperation and assistance of many

individuals. Research, calculations, and drafting were done by Bob DeBoer

2

and Adam H.

Langley

1

Aaron Twait

2

, Daphne A.

The Lincoln Institute of Land Policy seeks to improve quality of life through the effective use,

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accountable manner.

For Taxes Paid in 2020

Executive Summary ......................................................................................................................... 1

Introduction ..................................................................................................................................... 6

Why Property Tax Rates Vary Across Cities .................................................................................. 9

Homestead Property Taxes ............................................................................................................ 14

Commercial Property Taxes .......................................................................................................... 20

Industrial Property Taxes .............................................................................................................. 25

Apartment Property Taxes ............................................................................................................. 30

1a. Factors Correlated with Homestead Property Tax Rates in Large U.S. Cities ................. 52

1b. Factors Correlated with Commercial Property Tax Rates in Large U.S. Cities ............... 55

1c. Correlates of Cities’ Effective Tax Rates on Homestead Properties ................................ 58

1d. Correlates of Cities’ Effective Tax Rates on Commercial Properties .............................. 59

2. Homestead Property Taxes

2a. Largest City in Each State: Median Valued Homes ......................................................... 60

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

2c. Largest City in Each State: Homes worth $150,000 and $300,000 ................................. 64

2d. Largest Fifty U.S. Cities: Median Valued Homes ........................................................... 66

2e. Largest Fifty U.S. Cities: Median Valued Homes, with Assessment Limits ................... 68

3c. Selected Rural Municipalities .......................................................................................... 80

4. Industrial Property Taxes

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

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

4c. Largest Fifty U.S. Cities (Personal Property = 50% of Total Parcel Value) .................... 86

4d. Largest Fifty U.S. Cities (Personal Property = 60% of Total Parcel Value) ................... 88

4e. Selected Rural Municipalities (Personal Property = 50% of Total Parcel Value) ........... 90

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

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

5. Apartment Property Taxes

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

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 U.S. 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

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.

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.

Preferential Treatment for Homeowners

Many cities have preferences built into their property tax systems that result in lower effective

tax rates for certain classes of property, with these features usually designed to benefit

homeowners. The “classification ratio” describes these preferences by comparing the effective

effective tax rate that is 77 percent higher than homesteads. Nearly a third of the cities (17 of 53)

have classification ratios above 2.0, meaning that commercial properties face an effective tax

rate that is at least double that for homesteads led by Boston at 4.7.

Preferential Treatment of Homeowners: Ratio of Effective Tax Rate on

Commercial and Apartment Properties to the Rate on Homestead Properties (2020)

homesteads, with Charleston (SC) as the biggest outlier where the rate for apartments is 3.7

times higher than the rate on a median valued home. It is important to note that while renters do

not pay property tax bills directly, they do pay property taxes indirectly since landlords are able

to pass through some or all of their property taxes in the form of higher rents.

There are four types of statutory preferences built into property tax systems that can lead to

lower effective tax rates on homesteads than other property types: the assessment ratio, the

nominal tax rate, exemptions and credits, and differences in assessment limits. In total, 40 of the

these 40 cities benefit homeowners using at least two of these four statutory preferences. In 11

Property Tax Assessment Limits

Since the late 1970s, an increasing number of states have adopted property tax limits, including

constraints on tax rates, tax levies, and assessed values. This report accounts for the impact of

limits on tax rates and levies implicitly, because of how these laws impact cities’ tax rates, but it

bills between owners of nearly identical homes based on how long they have owned their home.

This report estimates the impact of assessment limits by calculating the difference in taxes

between newly purchased homes and homes that have been owned for the average duration in

each city, for median valued homes. For example, in Los Angeles, the average home has been

owned for 15 years and the median home value is $697,200. Because of the state’s assessment

limit, someone who has owned their home for 15 years would pay 47 percent less in property

taxes than the owner of a newly purchased home, even though both homes are worth $697,200.

The largest discrepancy is in New York City, which has an assessment limit that has capped

affected by parcel-specific assessment limits, new homeowners face higher property tax bills

Conclusion

Property taxes range widely across cities in the United States. This report not only shows which

cities have high or low effective property tax rates, but also explains why. Cities will tend to

have higher property tax rates if they have high property tax reliance, low property values, or

high local government expenditures. In addition, some cities use property tax classification,

which can result in considerably higher tax rates on business and apartment properties than on

homesteads. By calculating the effective property tax rate, this report provides the most

meaningful data available to compare cities’ property tax burdens. These data have important

implications for cities because the property tax is a key part of the package of taxes and public

Classification is the fourth factor that helps to explain differences across cities in property tax

rates on homesteads. Under classified property tax systems, states and cities build preferences

into their tax systems that result in lower effective tax rates for certain classes of property, with

these features usually designed to benefit homeowners.

homeowners are collectively bearing a smaller share of the property tax burden while businesses

and/or renters pay more. For example, Figure 1 shows that a 1 percent increase in the

commercial-homestead classification ratio is associated with a 0.40 percent decrease in the

effective tax rate on a median valued home, and a 1 percent increase in the apartment-homestead

classification ratio is associated with a 0.33 percent decrease.

Charleston (SC) has the highest classification ratio for apartment buildings relative to

homesteads, and the fifth highest commercial-homestead classification ratio. This means that

commercial buildings and apartments are taxed at a dramatically higher percentage of market

value than owner-occupied residences. In Charleston, a $1 million commercial property and a

Regression analysis shows that a 1 percent increase in the commercial-homestead classification

ratio is associated with a 0.43 percent increase in the commercial property tax rate, and a 1

percent increase in the apartment-homestead classification ratio is associated with a 0.39 percent

increase in the apartment tax rate.

Note that while renters do not pay property tax bills directly, they do pay property taxes

indirectly since landlords are able to pass through some of their property taxes by increasing

rents.

Since renters have lower incomes than homeowners on average, preferences given to

homesteads relative to apartment buildings will tend to make the property tax system more

regressive.

Appendix tables 2b, 5a, and 3a.

Results for commercial properties are shown in Appendix Table 1d. The analysis with effective tax rates on

apartments as the dependent variable uses the same set of explanatory variables; the R-square is similar (0.560) and

each variable has the same level of statistical significance as in Appendix table 1d with the exception that the

Bowman, John H., Daphne A. Kenyon, Adam Langley, and Bethany P. Paquin. 2009. “Property Tax Circuit

Other Factors

The four key factors described above explain more than two-thirds of the variation in cities’

effective tax rates on median valued homes and are thus the most important causes of differences

in tax rates across cities. However, there are other factors that also play a role. For example, two

reliance on property taxes and thus lead to lower property tax rates. But in fact, research shows

that the impact of state aid on local property taxes is ambiguous and depends on how state aid is

structured. Some state aid formulas can limit local spending, in which case state aid is likely to

reduce property taxes. However, other aid formulas like matching grants can encourage higher

local spending, and thus state aid may not reduce property taxes in those cases.

Similarly, if the state government bears a larger share of state and local government

expenditures, it makes sense that local government spending and the need for property taxes

might decline. That would be the case if the state assumes responsibility for public services that

would otherwise be provided by local governments, such as in Hawaii where there is a single

not found to be related with effective tax rates at a statistically significant level. This finding is

Kenyon, Daphne A. 2007. The Property Tax-School Funding Dilemma. Cambridge, MA: Lincoln Institute of

Figure 2 shows property taxes on a median valued home for the largest city in each state. The

analysis looks at homesteads, which are owner-occupied primary residences. The average

effective tax rate on median-valued homesteads for the 53 cities in Figure 2 is 1.379 percent. At

that rate, a home worth $200,000 would owe $2,758 in property taxes (1.379% x $200,000).

Tax rates vary widely across the 53 cities. The four cities at the top of the chart – Aurora (IL),

Newark, Bridgeport (CT), and Detroit – have effective tax rates on a median-valued home that

1.395 percent of value to 1.379 percent. The effective tax rate on the median-valued homestead

climbed in 29 cities and fell in 24 cities. The largest increase was in Nashville at nearly 34

percent, which mirrors the increase in the total local mill rate. Even after the increase,

Nashville’s effective tax rate is still 35 percent lower than the 53-city average in 2020, moving

up from 47

to 42

percent, led by Jackson (MS) at 8 percent, followed by Seattle, Des Moines, Atlanta, and

Newark.

Effective rates on median-valued homes fell the farthest in Buffalo, with a 39 percent decline,

from 1.593 percent to 0.971 percent. After ranking 15

in 2019, Buffalo dropped 22 places to

th

dropped from 90% in 2019 to 63.3% in 2020 for improved residential property. The local mill rate actually rose

the largest differences in their ranking in terms of effective tax rates versus tax bills on a median

valued home.

Value-driven differences in effective tax rates make the biggest difference in Boston, which in

property’s market value. This results in ultra-low effective tax rates of 0.094% on a $150,000

with the largest differentials in the effective rates between a $150,000-valued and a $300,000-

market value), Honolulu ($80,000 exemption), New Orleans (effectively $75,000 of market

value), and Washington, DC ($75,700 exemption). Readers should use some caution when

For information on homestead exemptions in each state, see “How Do States Spell Relief: A National Study of

Appendix Tables 2d through 2f show effective tax rates on homestead properties for a different

set of cities. Whereas Tables 2a through 2c focus on the largest city for each state, Tables 2d

through 2f show the 50 largest cities in the country regardless of their state. There is considerable

overlap between the two groups of cities, but some significant differences as well. In this set of

tables, California has eight cities, Texas has seven, Arizona has three, and five states have two

2d at 1.402%) exceeds the rate for the largest cities in each state (Table 2a at 1.379%). When

comparing median value homes after accounting for assessment limitations, however, the 50

largest cities drop to 6.3% below the group of largest cities in each state, with an average

effective tax rate of 1.22% (Table 2e) compared to 1.30% (Table 2b). This is because 20 cities of

the 50 largest in the country saw reductions from assessment limits in 2019, and only 10 cities of

the 53 that make up the largest cities in each state did so.

Effective tax rates can be rather homogenous across large cities in a single state. For example,

consider the effective rates on median-valued homes in the two largest states shown in Table 2d:

uniform property tax system that does not allow for different tax rates or assessment

ratios on different types of property.

The average effective tax rate on median-valued homes in the 50 rural communities in this report

is 1.278% for taxes paid in 2020, down from 1.330 in 2019. As with large cities, the rates for

rural municipalities vary considerably around that average. In just one municipality – Maurice

River Township (NJ) – the effective tax rate on a median-valued home is 2 times the average. In

contrast, nine municipalities feature effective tax rates of less than half of the average, with the

exemptions that apply to a fixed amount of value across the state and therefore exempt higher

proportions of homestead value from taxation in rural areas, where home values are generally

much lower than in large cities.

In 31 states, the effective tax rate on the median-valued home is higher in the largest city

in the rural municipality. Delaware had the biggest difference in 2020; the 1.068% rate in

Wilmington is 3.9 times the 0.374% rate in Georgetown. Only two other states have a tax rate in

the largest city that is at least two times higher than in the rural community: Arkansas (where

Little Rock is 3.6 times the rate of Pocahontas, and Oregon (where Portland is 2.1 times the rate

of Tillamook).

city are New York (where Warsaw is 2.3 times the rate of Buffalo) and Kansas (where Iola is 2

Some readers may want to use findings on effective tax rates from one specific table to reach

conclusions on property taxes throughout an entire state. The small differences in tax rates across

cities in California and Texas (Appendix Tables 2d-2f) show that the largest city in each state

can serve as a proxy for property tax rates throughout an entire state. However, the large

differences between the two largest cities in Tennessee and Arizona show that caution is needed

when extrapolating findings for a single city to an entire state.

Readers wishing to determine whether taxes in a state are high, low, or somewhere in between

are best served by comparing the rankings for urban and rural municipalities

six states (Illinois

, Michigan, Nebraska, New Jersey, Vermont, and Wisconsin) the effective tax

Excluding Washington (DC), which has no rural analogue, and Chicago (IL) and New York (NY), which have

property tax systems that differ substantially from those in the remainder of the state. In Illinois and New York, the

differentials are calculated between the rural municipality and the state’s second-largest city.

Washington DC.

suggesting that these states are most likely to have the highest homestead property taxes. States

where effective tax rates are among the ten lowest in both rural and urban settings are Alabama,

Colorado, Hawaii, Idaho, and West Virginia – suggesting that these states are most likely to have

the lowest homestead property taxes.

Figure 3 shows effective property tax rates for commercial properties worth $1 million dollars

for the largest city in each state. This analysis looks specifically at taxes on office buildings and

other commercial properties without inventory on site. Tax rates for other types of commercial

property will often be similar, but will vary in cities where personal property is taxed differently

than real property. The analysis assumes each property has an additional $200,000 worth of

fixtures, which includes items such as office furniture, equipment, display racks, and tools.

Different types of commercial property will have different proportions of real and personal

Tax rates vary widely across the 53 cities. Detroit and Chicago both had effective tax rates that

were 2.1 times the average. Bridgeport (CT), Providence, and Des Moines were close behind at

1.9, 1.9, and 1.8 times the average. On the other hand, Cheyenne (WY), Seattle, and Charlotte

(NC) have tax rates that are less than half of the average, and a larger group of cities are between

0.53 and 0.56 of the average, including Boise, Virginia Beach, Honolulu, Fargo, and Billings

(MT).

Wilmington (DE) had the largest increase at 41 percent, with an effective tax rate change from

1.062 percent in 2019 to 1.501 percent in 2020, moving them up from 47

The

For an analysis that looks at how effective tax rates vary between different types of commercial property, see “The

Effects of State Personal Property Taxation on Effective Tax Rates for Commercial Property” by Aaron Twait,

published by the Lincoln Institute of Land Policy (April 2018). The paper finds that average effective tax rates for

payable 2016 exceeded 1.9% for hospitals, restaurants, and office space while wholesale trade facilities encountered

rates roughly half as large. The paper also finds the current study assumptions realistically model the property taxes

Wilmington did have a 9% increase in local mill rates, but the change is mainly due to the sales ratio increasing

fixtures worth 20% of the real property value). Effective tax rates for commercial properties

generally do not vary based on property values, unlike homestead properties, where exemptions

or other tax relief programs often create significantly lower rates on lower valued properties.

Only 12 of the 53 cities have effective tax rates that vary based on their value. Value-driven

tax on a $100,000-valued property by 46%, but by only 0.3% for a property worth $25 million.

Other cities where the rankings vary significantly because of beneficial tax treatment provided to

lower-valued properties through credits, exemptions, or preferential assessment practices

include:

• Minneapolis (26

highest for $25m)

• Jacksonville, FL (36

Appendix Table 3b shows effective tax rates on commercial properties for a different set of

the country regardless of their state. There is considerable overlap between the two groups of

cities, but some significant differences as well. In Table 3b, California has eight cities, Texas has

seven cities, Arizona has three cities, and six states (CO, FL, NC, OK, and TN) have two cities

lowest is in Sacramento (45

). California accounts for 7 of the 8 cities ranked from 38

• For Texas’s seven cities, the highest tax rate is in San Antonio (6

lowest is in Austin (18

18

.

Interestingly, some states with just two or three cities in the study show a greater variance in

Appendix Table 4e provides additional information about how effective property tax rates vary

across states by looking at a rural community in each state. The rural analysis includes county

seats with populations between 2,500 and 10,000 that are located in nonmetropolitan counties.

shown in Appendix Table 4a. For 29 states, the effective tax rate on a $1-million valued

industrial property is lower in the selected rural municipality than in the state’s largest city.

The state with the biggest difference in the tax rate between the largest city and the rural

municipality is Delaware, where the tax rate on an industrial property worth $1 million in

Georgetown is less than one-third of the rate in Wilmington (0.277% vs. 0.901%). Other states

where the tax rate in the rural municipality is significantly lower than the largest city include

Oregon (53% lower), Rhode Island (49% lower), Connecticut (47% lower), Alaska (45% lower),

Alabama (43% lower), and Arizona (42% lower).

higher), and Wyoming (41% higher).

Variation in industrial tax rates across the 50 rural cities is very similar to variation across the

largest cities in each state.

Some readers may want to use findings on effective tax rates from one specific table to reach

conclusions on property taxes throughout an entire state. The small differences in tax rates across

cities in California and Texas (Appendix Table 4c) show that the largest city in each state can

serve as a proxy for property tax rates throughout an entire state. However, the large differences

between the two or three largest cities in Tennessee, Arizona, and Colorado show that caution is

South Dakota, Virginia, and Wyoming are the six states that had bottom ten rankings in both

property tax systems that differ substantially from those in the remainder of the state. In Illinois and New York, the

Figure 5 shows effective property tax rates for apartment buildings worth $600,000 for the

largest city in each state. The analysis assumes each property has an additional $30,000 worth of

fixtures, which includes items such as stoves, refrigerators, garbage disposals, air conditioners,

drapes, and lawn care equipment. Readers should use some caution when interpreting these

results; see the box on comparing property taxes calculated with fixed property values for

guidance (page 23).

The average effective tax rate on apartment properties for the 53 cities in Figure 5 is 1.610

slightly more than two-thirds higher than the average for these cities. Conversely, there are five

Honolulu, Cheyenne, Denver, Salt Lake City, and Washington (DC).

Some cities had significant changes in their effective tax rates from 2019 to 2020. Four cities

saw effective tax rates decline over 10 percent, led by Buffalo at 38% and Charleston (WV) at

34%.

Buffalo dropped from 9

to 23

place.

Boise (ID) dropped 14% and Cheyenne (WY) dropped 12%. Other cities with large declines

include Bridgeport (10%), Des Moines (8%), and Chicago (7%).

(8%), Newark (6%), and Burlington (6%).

Appendix Table 5b shows effective tax rates on apartment properties for a different set of cities.

Whereas Table 5a has the largest city for each state, Table 5b shows the 50 largest cities in the

country regardless of their state. There is considerable overlap between the two groups of cities,

but some significant differences as well. In Table 5b, California has eight cities, Texas has seven

cities, Arizona has three cities, and five states (CO, FL, NC, OK, and TN) have two cities each.

The average effective tax rate for apartment properties is 1.5 percent lower for the 50 largest

cities shown in Table 5b than the cities shown in Table 5a. In some states, tax rates do not vary

• For Texas’s seven cities, the highest tax rate is in Fort Worth (2

highest) and the lowest

is in Austin (12

). Texas accounts for three of the top four cities and seven of the top 12.

However, in some states there are considerable differences in effective tax rates between

different cities. Consider these notable differences in rankings and effective tax rates between the

cities in these states:

• In Tennessee: Memphis has the 6

highest tax rate (2.535%), while Nashville has the

22

highest (1.423%).

• In Arizona: Phoenix and Tucson have the 27

and 35

1.201%, respectively), while Mesa has the 42

Appendix Table 5c provides additional information about how effective property tax rates vary

across states by looking at a rural community in each state. The rural analysis includes county

seats with populations between 2,500 and 10,000 that are located in nonmetropolitan counties.

municipality is Delaware, where the tax rate on a $600,000-valued apartment property in

the tax rate in the rural municipality is significantly lower than the largest city include: Oregon

(53% lower), Alabama (43% lower), and Arkansas (41% lower).

On the other hand, in 22 states the tax rate is higher in the rural municipality than in the largest

city in the state. The biggest difference is in Massachusetts, where the tax rate on an apartment

property worth $600,000 in Adams is taxed at more than twice the rate in Boston (1.980% vs.

0.895%). Other states where the tax rate in the rural municipality is significantly higher than in

the largest city include Kansas (94% higher), New York (74% higher), Hawaii (67% higher), and

South Carolina (58% higher).

Variation in apartment tax rates across the 50 rural municipalities is very similar to variation

across the largest cities in each state.

Some readers may want to use findings on effective tax rates from one specific table to reach

serve as a proxy for property tax rates throughout an entire state. However, the larger differences

Excluding Washington (DC), which has no rural analogue. In Illinois and New York, the differentials are

states (Michigan, New Jersey, and Vermont) have top ten rankings in both an urban and rural

setting – suggesting that these states are most likely to have the highest apartment property taxes.

Colorado, Hawaii, Utah, Virginia, and Wyoming are the five states that have bottom ten rankings

in both urban and rural settings.

Many cities have preferences built into their property tax systems that result in lower effective

tax rates for certain classes of property, with these features usually designed to benefit

homeowners. The “classification ratio” describes these preferences by comparing the effective

tax rate for two types of property. For example, if a city has a 3.0% effective tax rate on

commercial properties and a 1.5% effective tax rate on homestead properties, then the

commercial-homestead classification ratio is 2.0 (3.0% divided by 1.5%).

First, states may have different assessment ratios for different classes of property, which is the

percentage of market value used to determine taxable values. For example, a state may have a

100% assessment ratio for commercial property and a 70% assessment ratio for residential

property, which means a $100,000 commercial property would be taxed on its full market value

but a $100,000 residential property would be taxed as if it were worth $70,000.

Second, cities may have different nominal tax rates for different classes of property, which is the

tax rate applied to the taxable value to determine the tax bill. The nominal tax rate is also known

as the statutory tax rate or millage rate.

For details on classification in each state, see the Property Tax Classification table on the Lincoln Institute of

Land Policy’s Significant Features of the Property Tax website (https://www.lincolninst.edu/subcenters/significant-

For information on homestead exemptions in each state, see “How Do States Spell Relief: A National Study of

Figure 6a shows the commercial-homestead classification ratio for the largest city in each state,

by comparing the effective tax rate on a $1 million commercial property to the effective tax rate

on a median-value homestead property.

not taxable, we exclude commercial fixtures and instead compare only the effective rates on real

The commercial-homestead classification ratio varies widely across the 53 cities. The top three

cities of Boston, Honolulu, and Denver all have classification ratios greater than 4.0, and four

more cities – Charleston (SC), Chicago, New York City, and Charleston (WV) – all have

classification ratios greater than 3.0. Nearly a third of all cities (17 of 53) have classification

ratios above 2.0, meaning that commercial properties face an effective tax rate that is at least

double that for homesteads.

classification system favors commercial properties over homesteads: Omaha (NE) and Las

Vegas. The property tax systems in these cities are not structured to favor commercial properties,

exemptions or credits that favor homesteads over commercial properties, and 6 offer homesteads

these four features, and in Albuquerque, Charleston (SC), Chicago, Minneapolis, and New York

City, homeowners benefit from three of the four. In 11 cities, preferential treatment for

homeowners is delivered through exemptions or credits alone, while in 8 cities preferences are

delivered exclusively through differences in assessment ratios or nominal tax rates.

On average, tax disparities between commercial and homestead properties rose nearly 8 percent

in 2020: increasing from 1.713 in 2019 to 1.765 in 2020. The number of cities with more than a

3.0 ratio increased from five to seven, and those with more than a 2.0 ratio increased from 16 to

17 cities. The 2020 classification ratio is second highest in the past twenty years, slightly lower

than the previous high of 1.79 in 2008 and 2012.

places to 15

, Bridgeport moved up 15 places to 35

, and Sioux Falls moved up 15 places to

36

. Changes in sales ratios appear to be the largest factor in the increases for these three cities.

The commercial-homestead classification ratio declined in 21 cities, with the largest drops in

Charleston, SC (-0.405); Boise, ID (-0.110); and Jackson, MS (-0.108). Charleston’s significant

“statutory classification”

and are treated differently in state law remained higher and increased

at a similar rate to the overall average, rising from 1.945 to 2.001.

Figure 6b shows the apartment-homestead classification ratio for the largest city in each state,

by comparing the effective tax rate on a $600,000 apartment building to the effective tax rate on

a median-value homestead.

homeowners at the expense of renters. The apartment-homestead classification ratio shows that

apartments subsidize homestead property taxes at about half the rate that commercial properties

do, with apartments facing an effective tax rate that is 33% higher than homesteads on average.

ratio as commercial-homestead classification). There are six other cities with classification ratios

with the lowest ratios in Bridgeport (CT), Virginia Beach, and Cheyenne (WY). The preference

given to apartments in these cities is not the result of statutory provisions, but is simply the result

of lower average sales ratios for apartments relative to homesteads.

Appendix Table 6b provides more details about the apartment-homestead classification ratio in

each city. As with commercial properties, a large majority of cities have higher effective tax

rates on apartments than homesteads. However, the preferences given to homesteads relative to

apartments are caused more by homestead exemptions and credits than by differences in

assessment ratios or nominal tax rates. In total, 36 of the 53 cities have statutory preferences for

homesteads relative to apartments, but only 12 offer more than one preference (Charleston, SC

classification is written into law with the assessment ratio, nominal tax rate, or exemptions/credits.

On average, tax disparities between apartments and homesteads declined slightly in 2020, falling

from 1.344 in 2019 to 1.329 in 2020. The apartment-homestead classification ratio declined in 28

cities, with the largest drops in Charleston, SC (-0.405); Des Moines, IA (-0.188); Charleston,

WV (-0.186), and Boise, ID (-0.110). The classification ratio increased in 22 cities. Columbus

This study updates the 50-State Property Tax Comparison Study: Payable Year 2019. It examines

four distinct classes of property using a standard set of assumptions about their “true” market

values and the split between real and personal property. The report calculates property taxes for

parcels with a range of property values in three sets of cities:

• the largest city in each state and the District of Columbia along with Aurora, Illinois and

describes the methodology used to estimate the impact of assessment limits.

As an aid in reviewing the remaining assumptions of this study, it is helpful to think of the property

tax calculation as having six distinct components:

(1) a “true” market value (TMV),

(2) a local sales ratio (SR),

(3) applicable exemptions that reduce taxable value (E),

Component 1: True Market Value (TMV)

The calculations for this study start with an assumption about the true market value of the four

classes of property. This is the market value of a parcel of property as determined in a local real

estate market consisting of arm-length transactions between willing buyers and sellers. This is in

tax calculations.

This study assumes the true market values are consistent across all locations in the study. For

example, the ranking of property taxes on a residential homestead parcel with a true market value

of $150,000 assumes that the parcel is actually worth $150,000 in the local real estate market in

each location in each state, regardless of what the local assessor may think the property is worth.

For some locations, the assumed true market value may be very atypical (a $150,000 home in

Boston, for example). Nevertheless, this study assumes the property exists there. Essentially, this

study is meant to compare the effects of property tax structures. Using fixed values allows the

isolated effects of tax structures to be observed. That is, the report compares property taxes, not

local real estate markets. However, as previously discussed the report does include tables that show

market value” for each property. However, in every state, the quality of property tax assessments

is a significant aspect of the local property tax scene. Omission of this aspect of the property tax

calculation would make this study much less useful.

Sales ratios are simply a measure of the accuracy of assessments. The sales ratio is determined by

comparing assessments to actual sales. A sales ratio of 100% indicates that assessments are equal

to market value. Sales ratios of less than 100% indicate that assessments are less than market value;

sales ratios of over 100% indicate that assessments are higher than market value. In some states,

state aid formulas use sales ratios to adjust assessors’ values when local property wealth is used as

a measure of local fiscal capacity. While sales ratios are generally not used in calculating an

in a given location is 93%, we convert the $150,000 true market value to $139,500 ($150,000 x

Sales ratio data is provided either at the city or county level, depending on the state. We use city-

level data where appropriate; otherwise we default to county data. Our preference is to use sales

ratio data that differentiates between different types of property. However, in many locations only

one ratio is reported, covering all types of property. In those cases, we apply the same ratio to all

of that location’s examples in the study.

In the case of personal property, sales ratios are generally not used. Many states do not have sales

ratios for personal property or assume they are 100%. Where states report personal property sales

ratios, we include them in this study.

exemptions are a local option. Because exemptions are subtracted from assessed value, we apply

them after first applying the sales ratio to true market value, since the exemption will not

incorporate any of the assessment error to which properties may be subject.

Note: in some cases, the exemption is subtracted from taxable value instead of assessed value. In

those cases, we apply the exemption after applying the classification rate.

However, governments often use differential rates to affect the distribution of property tax levies

– to provide tax relief for a selected class of classes of properties at the expense of others.

In most states, state legislatures set the classification schemes. In a few states, local governments

have some autonomy over classification rates.

Because of the wide variation in the quality of assessments across the states, particularly across

classes of property, many states have no classification scheme in statute and may, in fact, have

significant classification via uneven assessments across classes of property. (In some cases, this

may violate state constitutional provisions on uniform assessments.) Some states, like Minnesota,

lien date in 2020, regardless of the date(s) on which payments are due. In some cities, there are

therefore rates will differ based on which school district a parcel is located in. This study uses the

rate that is most prevalent in a city.

This study excludes special assessments since they are more in the nature of user charges, do not

affect a majority of parcels, and are usually not sources of general revenue.

Component 6: Credits (C)

The final step in the tax calculation is to recognize any general deductions from the gross property

tax calculations (credits). The study includes any credits that apply to a majority of parcels of the

market value of a property. This contrasts with the millage rates or other rates that are applied to

taxable value to determine a parcel’s tax burden. By including the effects of all statutory tax

provisions as well as the effects of local assessment practices, effective tax rates have the virtue of

allowing more meaningful comparisons across states and property types.

Fiscal Excellence.

Selection of Additional Urban Cities

In Cook County (Chicago) and in New York City, the property tax system (notably, the assessment

ratios) is substantially different from the system used in the remainder of Illinois and New York,

respectively. We include the second-largest cities in those states (Buffalo and Aurora) to represent

the property tax structures in the remainder of those states. In essence, the Urban analysis is a

comparison of 53 different property tax structures.

7 county included Nantucket Island, which does not seem comparable to rural counties in other

states. In these six cases, we selected the county seat in the most rural county available.

Data on Median-Valued Homes

This study compares homeowner property taxes using a “median value analysis”, which sets the

home value in each city equal to the median value of owner-occupied housing units in the city, or

for smaller cities, in the relevant county. This data comes from the one-year or five-year data in

area; counties coded “7” are nonmetro counties within the same population range that are not adjacent to a metro

Note that the payable 2014 edition of this study was the first to use ACS data on median home

values. Prior to that, median home value data came from metropolitan-area data provided by the

National Association of Realtors. Readers should make time-trend comparisons of tax burdens on

median-valued homes before and after this methodological change with care.

Because the goal of this study is to compare the actual tax experience of the largest number of

taxpayers in the selected jurisdictions, this study excludes special property tax provisions.

This report studies hypothetical properties in four property classes (1) residential homesteads, (2)

commercial property, (3) industrial property, and (4) apartments. Except for apartments, the study

calculates taxes for all properties based on multiple values that are fixed across states. All classes

not have substantial agricultural operations. Second, these are the classes of property that

develop assumptions about value (public utilities and farms, for example).

Selection of Fixed Values

This report compares the tax burdens various property tax systems across the nation impose on a

fixed amount of value. Holding property values constant across all jurisdictions controls for the

effects differences in property values have on effective tax rates. The specific fixed values the

study uses for homes, commercial, and industrial properties were largely chosen between 1995

and 2000 to represent a low-valued

Importantly, in most locations the effective tax rates for commercial and industrial properties do

not vary much with value. Therefore, with few exceptions the specific fixed values selected for

inclusion in the report are not of major consequence.

Real and Personal Property

Making these assumptions is challenging because the specific mix of real and personal property

obviously varies by industry and location. With the permission of the Minnesota Department of

Revenue’s Research Division, we have borrowed the methodology they use to determine shares of

real and personal business property in their biennial Tax Incidence Study.

Using that

methodology, we have calculated state-specific real property, machinery and equipment, fixtures,

and inventory shares for industrial parcels. The findings this model generates indicate that the

median split for industrial parcels nationwide is 45.6% land and buildings (real property) and

54.4% personal property. Overall, the split ranges from 41.3% real/58.7% personal (Michigan) to

49.6% real/50.4% personal (Massachusetts).

value of personal property used for each property class.

Tax Incidence Studies are available on the website of the Minnesota Department of Revenue:

This study does not include intangibles such as bank balances or financial securities in the

property tax calculations.

Definitions of Real and Personal Property

portable and often mounted on special foundations. Examples include large printing

presses and assembly robots.

Except for New York City and Portland (OR), which have unique assessment limits that do not reset assessed

values when a property is sold. To measure the impact of assessment limits in these cities, we compare the

difference in effective tax rates on a newly-built home and a home built prior to the implementation of assessment

limits (1981 in New York City; 1996 in Portland). The average home was built 67 years ago in New York City and

65 years ago in Portland, and thus have had growth in their assessed value constrained since the limits were

implemented. The analysis compares a newly-built and older home with identical market values (the median valued

Twait, Aaron. 2012. “Property Assessment Limits: Effects on Homestead Property Tax Burdens and National

This report measures two “classification ratios” – the ratio of the effective tax rates between a

median-valued home and the real portion of a $1 million commercial property (“commercial-

homestead classification ratio”) and between a median-valued home and the real portion of a