Are Property Taxes Fair?

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Property tax is probably the fairest tax collected by municipalities. However, it is also probably the unfairest tax collected by municipalities.

The state where individual life determines how much they pay, which may be higher or lower. An individual’s economic status can also be a factor in how this tax impacts their pocketbook.

In fact, when it decides on taxes and renting versus owning, this may be the only time renting is the best option. States collect property taxes on:

Land

  • Improvements to land such as additions to property
  • Human-made objects that are not stationary structures.

Individual county tax collectors usually assess it in each state. Land and property are mailed tax payment notices resulting from appraisals of the property’s value. Notices of assessments can be disputed by contacting the tax collector in the land owner’s county. The tax bill is typically paid from a homeowner’s escrow amount on their mortgage.

Property Taxes Fair

As mentioned, property taxes can disproportionately affect some homeowners. Increases in a state’s tax rate can often double or even triple a homeowner’s tax liability and often leave them with no option but to sail their residence or land.

Critics of this form of taxation have also decried that it does address some individuals’ situations. Although it is ordinarily paid as part of an escrow account, increased property tax means they would have to pay more into escrow.

Senior citizens on a fixed income have been identified as a group sometimes struck by taxes on their property. Such individuals may have high taxes due to an increase in their property value yet find themselves unable to pay because of a reduced income during retirement. In some cases, this mandatory tax does not take into account factors that may impact someone’s ability to pay, such as personal tragedy or acts of nature.

Property tax has also been criticized because of the different individuals must pay between states. Alabama has the lowest rate at 1.3 percent on property value, while New Hampshire has the largest at 4.9 percent. The average percentage among is somewhere in the range of 2.3 percent.

While Alabama has a tax rate of 1.3, which would seem to make it an attractive location for a home or business owner, someone with property a few feet away in neighboring Georgia would have to pay 2.6 percent and more than double in Florida tax rate of 3.1 percent.

How to spend the revenue (or waste it, as is the case with many governments) generated by taxing property values is determined by state legislatures. A state’s legislature also has said over reducing or raising the tax rate and determining how often it should be collected. Additionally, there may also set limits on how much increase there can be every year, if any.

Property tax definitely helps states with revenue. But while much needed, property tax can also be a deciding factor in where an individual lives or their ability to retain the American Dream of owning land.