Property tax is probably the fairest tax collected by municipalities. However, it is also probably the unfairest tax.
The state of individual lives determines how much they pay, which may be higher or lower. An individual’s economic status can also influence how this tax impacts their pocketbook.
When it comes to 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 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. Statements of assessments can be disputed by contacting the tax collector in the landowner’s county. The tax bill is typically paid from a homeowner’s escrow amount on their mortgage.
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, leaving them with no option but to sell their residence or land.
Critics of this form of taxation have also decried that it does not address some individuals’ situations. Although property tax 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 increased property value, yet they cannot pay due to a reduced retirement income. In some cases, this mandatory tax does not consider factors that may impact someone’s ability to pay, such as personal tragedy or acts of nature.
Property tax has also been criticized because individuals must pay it 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 is somewhere in the range of 2.3 percent.
While Alabama’s tax rate of 1.3 makes 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, more than double the Florida tax rate of 3.1 percent.
As with many governments, state legislatures determine how to spend the revenue (or waste it) generated by taxing property values. A state’s legislature also has said over reducing or raising the tax rate and determining how often it should be collected. There may also be limits on how much increase there can be every year, if any.
Property tax helps states with revenue. However, while much needed, property tax can also decide where an individual lives or their ability to retain the American Dream of owning land.
