I live in Austin, Texas…this past weekend I visited in-laws in Alabama, and for the hell of it looked up houses in their area on Zillow - I noticed their property taxes and valuations seemed very low compared to where I live - for example, this house:
So, $600 taxes on a $20k assessment (?) on a $240k house?
My house in Austin, Texas has a market value of approx. $320k, taxes are $5000 on an assessment of $275k.
Why are my property taxes, roughly speaking, 10X higher?
(I realize we do not have state income tax in TX - is that the major factor?)
Yeah, it is just how a state decides to get money and who to get it from. Some states have no property taxes but auto license plates cost hundreds or thousands.
In a few places, the property is not assessed at market value, it’s assessed at purchase price. Ridiculous system that means that people who bought their house 30 years ago and never moved pay a fraction of recent buyers. I don’t know if that’s the case here; and it wouldn’t be relevant information for a buyer anyway.
It’s pretty much arbitrary based on a community’s needs and what it wants to fund. In an urban area like Chicago, upscale suburbs have very high property taxes because they heavily fund education and other community services.
Also, you may wish to compare the level of services provided. I had a very wealthy relative move from the Chicago suburbs to Florida - in large part due to feeling the IL taxes were too high. Within a year of moving, he and his wife made repeated comments about the public services in FL being crap. At least in some instances, you don’t get what you don’t pay for.
You say your house is assessed at $275k. Do you believe that is close to fair market value - i.e., what you would get for it if you sold it? Just for comparison’s sake, up here in my Chicago burb, I doubt my house would sell for $550k, and my taxes are well over $10k.
I don['t know if it’s specifically because there’s no state income tax ( do your property taxes go to the state?) but generally speaking, governments have to get there money from somewhere. My city has relatively low property taxes ( I pay the same $5K as you on a house worth nearly $500K ) and I don’t have school taxes - but my city has an income tax. By the time I’m done with it, I probably don’t pay a much different total than my friends with similar incomes in the suburbs who don’t have a local income tax.
Texas is in the top 5 (top 3 maybe?) in terms of property taxes in the country.
It’s a function of how it wants to fund itself. There’s a heavy anti-income tax sentiment in the state. State income tax is already not allowed without a voter referendum and heavy legislative action but somehow there’s still a proposed constitutional amendment this year about making it double, ultra disallowed. Kind of a waste of an amendment but there you go.
There’s also a mindset that business taxes should be kept as low as possible. Some argue these have been made too low, but whatever the case, the funds have to come from somewhere, and that leaves property taxes and sales taxes. There’s sales tax but that’s already reasonably high as well at 6.25% (plus up to 2% more at the local/county level).
ETA: note this system has led to some interesting quirks, like the role of the appraisal district. In the wealthier parts of the state, people can get some massive increases in valuation year on year and many suspect some of it is to increase tax revenue in some districts. Despite some limits on how this affects year on year increases on tax, it has led to a lot of grumbling and potential legislative action.
If you do the math, $600 tax on a $20K assessment is a higher rate than $5K taxes on a $275K assessment.
Taxes vary for many reasons as others have stated.
Most important: Don’t trust Zillow.
I looked up my own (Texas) house on Zillow and their ‘Tax History’ list claimed that taxes for the last two years were about a third of what I actually paid, and the amounts for the three previous years were about three times what I paid. And that’s with their (inaccurate) assessment value almost doubling for the two recent years that they claimed the taxes were lower.
My father had a house that was variously valued at about $300,000 in NJ. His taxes were $8,000. That’s more that my house, which was valued at $C500,000 and combined city and school board taxes were $C7,000. OTOH - Zillow… My nephew’s smaller 2.5 story on a narrow lot in NJ was valued at $875,000 while his parents’ multi-acre mansion was valued at $3M. I’m not sure it’s accurate. (And his parents paid $40,000 a year taxes a few years ago.)
IIRC it was about 30 or so years ago that the property tax regime in much of Canada (It’s a provincial thing) was updated to reflect market/assessed value, not last sale price. Sale price was fine until housing values started climbing like crazy. One piece of logic was that a house that had not changed hands for 50 years was probably owned by an old person on a fixed income and would eventually be sold, and you didn’t want to tax a senior out of his home. It’s when people who’d only owned a house for 10 or 20 years were paying substantially less that the system got out of whack.
I don’t know of a case where residential property tax goes directly to a state. But in a lot of states a big portion of municipal budgets are funded by grants from the state. If the state does that less, because it has fewer revenues sources itself, municipalities have to make it up in higher property tax. Which is why TX’s lack of income tax does figure into tendency to high property tax. It’s is not extremely low in state and local spending compared to state GDP per capita*, and doesn’t have other large unusual sources of state revenue besides sales tax (TX obviously has large oil and gas production but tax on those doesn’t amount to a significant % of state revenue unlike if a few lower population energy producing states).
*see this scatter plot, state and local spending per capita v state gdp per capita. TX is a little to the low spending side of an imagined median line between GDP per capita and state/local spending per capita. But that is spending, which doesn’t include the other variable of how much federal money per capita flows to state govt’s (as opposed to federal money going to state residents directly, which most ‘giver v taker states’ stats also include thereby making the numbers of doubtful significance IMO).
FWIW, I agree that taxing and assessing different properties at different rates is absurd. Houses A and B, side by side and similar in value, should pay similar real estate taxes, since they have similar government services and structures. But, anyhoo…
In some states (and counties within a particular state), assessed values are tied to the last time a county-wide reassessment was conducted. Or arbitrarily set at 50%, or some other percent of market value. Before judging whether a particular property is under- or over-assessed, you need to know how the calculation is done in that jurisdiction.
But, as pointed out, states, counties, cities and school districts all get tax revenue. It can be from real property taxes, personal property taxes (vehicles, mostly), income taxes and/or sales taxes. You need to see the big picture to accurately compare locations.
Having said that, property taxes are obscenely high in many northeastern states (NJ, lookin’ at you), and much lower in many southern states.
They got our recent taxes a bit wrong. And going back quite a bit, very wrong circa 2004.
One thing that they aren’t telling people: we get a senior tax break. Someone younger buying our house is not going to be paying anything like that at all.
Their descriptions of basic things about our and our neighbor’s houses are full of errors.
Part of this is how the state is choosing to reach into your wallet. The usual suspects are:
Income tax
Property tax
Sales tax
You might catch a bear on one (no income tax) or another (low property tax) but you have to pay the piper eventually. And some states, such as Connecticut and New York, are just high on state pensions and social programs, and that drives all of them.
Yes, overall tax burden.
CA for example, has high income tax but low prop tax- altho with it’s high sales taxes it is still up there. NY, Conn & NJ are the 3 highest.
Depending on how you read that sentence, Michigan. Residential property taxes are administered at the local level. In that sense Michigan clearly doesn’t count. A big chunk of those taxes are set by the state and get passed directly through to the state from the local level by law. In that sense Michigan is a case that counts. Local governments are effectively just collection agents for that part of the property tax burden.
Michigan moved to a statewide funding system for public schools in 1994. The main property tax for school funding goes to the state. It is then disbursed back to the districts. It’s not a strictly equal funding per student formula but it is closer than the common district by district school funding approach.
Yes, Texas property taxes are higher in comparison to other states, because it is their primary funding source.
If you are in a profession where your income is going to be rising at a regular pace due to promotions, your overall tax burden as a % of income in Texas will actually decrease over time, assuming you live in your home for an extended period time. As property values tend to be fairly stable in Texas.
I notice you folks in Texas sometimes drive on toll roads. That’s absolutely unthinkable here in Missouri, where proposals to put tolls on the Interstates have been repeatedly shot down by the state legislature.
If my Google-fu is correct, you’re also paying about 26 cents/gallon in state gasoline taxes. We pay 17 cents/gallon.
Um…Texas is a big state and this is certainly not true for the whole of it, especially this last decade.
Appraisals (and property values and corresponding property taxes) have grown very fast in all the metropolitan areas. From the Dallas Fed in 2018:
While this doesn’t indicate things are unusually worse in Texas than elsewhere, it certainly doesn’t indicate property value stability.
There’s almost no way the Interstates would go toll only, though there are limited toll lanes on many of them through the cities. But it is true that when a new highway goes up, there’s inevitably a push to make it a tolled highway.