5 cities with the highest property tax rates. Here’s why rates can vary so much from place to place

Real Estate

Andreypopov | Istock | Getty Images

Property taxes can be a major expense for households, and several factors may affect the size of the bill, research shows.

These levies — which typically fund public services, such as K-12 education, police and firefighters — can be tough to compare across jurisdictions.

But there are four key reasons for differences: property tax reliance, property values, local spending and classification, according to a new report from the Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence.

More from Your Money:

“In some communities, local residents are willing to pay higher taxes but expect higher spending on things like public parks and a robust public transportation network,” said Katherine Loughead, a senior policy analyst with the Center for State Tax Policy at the Tax Foundation. “In other communities, residents are less interested in the expense of public amenities but instead want to pay lower taxes.”

Property tax is “really instrumental” as a local revenue source, but stressed that every community has different priorities and budgeting goals. Loughead explained.

Property taxes have ‘so many variables’

“With property taxes, it’s pretty simple stuff,” said Richard Auxier, senior policy associate at the Urban-Brookings Tax Policy Center. “But there are just so many variables.”

For example, there may be state restrictions on property tax growth or relief programs for certain residents, like elderly, disabled or veteran homeowners.

This is why your next-door neighbor’s property tax bill can be so different from yours, Auxier explained. “When you turn the knobs to different points, you get different outcomes.”

Generally, cities tend to have more expensive property tax rates if there’s high property tax reliance, low property values, or more robust local government spending, the report concludes.

The report analyzed the “effective tax rate,” or taxes as a percent of a property’s market value, for more than 100 cities to better understand these variances. The calculation also included factors like exemptions and credits.

5 highest effective property tax rates in 2022

Detroit skyline
Reese Lassman | EyeEm | Getty Images

These are the five highest effective property tax rates on a median-valued home in 2022.

  1. Detroit: 3.21%
  2. Newark, New Jersey: 3.20%
  3. Aurora, Illinois: 3.04%
  4. Bridgeport, Connecticut: 3.04%
  5. Portland, Oregon: 2.59%

The average effective tax rate for median-value homes was 1.32% in 2022, based on the report’s analysis of the largest city in each state.

Of course, cities with high effective tax rates can still have relatively low property tax bills, based on home values.

For example, Los Angeles and Wichita, Kansas have a similar effective tax rate of around 1.16%. But Los Angeles homeowners have significantly higher property tax bills due to much higher median home values.

Articles You May Like

Some market experts are talking about ‘animal spirits.’ Here’s what that means when it comes to investing
Trump’s DOGE Must Do More Than Make Big Government More Efficient
Visa and Mastercard execs grilled by senators on ‘duopoly,’ high swipe fees
Long-Term Capital Gains Tax: How Much Tax Will I Owe?
Your Complete Guide to Employee Stock Options and Tax Reporting Forms