A government can finance its activities through taxation, borrowing, new currency issuance, or a combination of all three. The choice is vitally important, as it determines the extent to which the government contributes to the value of economic stability and growth. It also affects the proportions of government expenditures borne by the rich, the poor, and all citizens in general.
Taxes based on property ownership were used in ancient times, but the current tax has its roots in the feudal obligations of British and European kings or landowners. In the 14th and 15th centuries, British tax assessors used ownership or occupancy of the property to estimate the taxpayer’s ability to pay. Over time, the tax came to be considered a tax on the property itself (in rem). In the United Kingdom, the tax became a system of “rates” based on the property’s annual (rental) value.
The property tax in America was closely related to frontier economic and political conditions. In pre-commercial agricultural areas, property taxation was a viable source of revenue for local government, and the equitable taxation of wealth was consistent with the prevailing egalitarian ideology.
Property taxes are imposed at the local level, i.e., each state sets its guidelines on how local governments in its specific jurisdiction can tax its residents, so engaging the services of property tax consultants is very useful. Property taxes are the most significant source of revenue for state and local governments in the U.S. Property taxes are levied based on the value of your property. Currently, the average property tax rate is between 0.2 and 1.9%. In most cases, the property tax will only apply to residential property, but some jurisdictions impose a levy on property used for business.
In many states, appraisal techniques have greatly improved. For example, computer-assisted mass appraisal (CAMA) combines computer technology, statistical methods, and valve theory to make reasonably accurate property appraisals possible. In addition, increased state aid to schools, stemming in part from court decisions requiring equal quality of schools, has increased pressure for statewide uniformity of valuations.
These days states use elaborate statistical procedures to measure the quality and equality of assessments from one part of the state to another. Currently, deviations from uniformity are not so much due to inadequate evaluation regarding the provisions of property tax rules.
The particular property tax may depend on who owns it, its use, and last sold. The administrator may know the owner’s income, age, medical condition, and prior military service to calculate the tax. Anomalies abound as taxpayers find ways to make the complicated system work in their favor. For example, a few bales of hay harvested on developable land may qualify it as agricultural land, and enterprise zones, intended to encourage development in poverty-stricken areas, may contain industrial plants, but not people, poverty-stricken or not.
The numerous special provisions fuel the demand for other special requirements. As the base shrinks, the tax rate increases, and taxpayers become aware of the unique benefits enjoyed by their neighbors or competitors, thanks to the expert services of property tax consultants. This may lead to the demand for general tax limitations or the search for additional exemptions and special provisions.
Photo by Nataliya Vaitkevich from Pexels
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