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Report: Property Tax Collections Increased Despite Decline in Home Values

From 2007 to 2008, State and Local Property Tax Revenues Increased 4 Percent Nationwide

 

Washington, DC, August 31, 2010 – Despite a nationwide decline in home values, state and local property tax collections increased by more than 4 percent across the country from fiscal year 2007 to fiscal year 2008, according to a new Tax Foundation report based on recently released Census data. In three states – Florida, Indiana and New Mexico – property tax revenues rose more than 10 percent. Four states – Michigan, South Carolina, Texas and Vermont – saw lower property tax collections in FY 2008 (July 1, 2007 through June 30, 2008). “Home values dropped by almost 16 percent from 2007 to 2008, yet property owners in most states paid more in 2008 than they had the year before,” said Tax Foundation Staff Economist Kail Padgitt, Ph.D., who co-authored the report. “There are two explanations for this: First, administratively, it’s relatively easy for localities to raise property tax rates to compensate for declining property values. Secondly, lagged or incorrect property assessments meant revenues continued to increase despite a drop in market value.” Tax Foundation Fiscal Fact, No. 243, “Property Tax Revenue Increased As Property Values Fell,” is co-authored by Tax Foundation Adjunct Scholar Aaron Merchak and is available online at http://www.taxfoundation.org/publications/show/26667.html. Nationwide, state and local property tax revenues increased by 4.2% from FY 2007 to FY 2008, from $1,298 in property tax collections per capita to $1,352. The states that experienced the largest increases in state and local property tax collections from FY 2007 to FY 2008 are Florida (11.7%), Indiana (11.6%), New Mexico (10.2%), Hawaii (9.7%), Nevada (9.2%), Alabama (9.1%), West Virginia (8.7%), Oklahoma (8.4%), Minnesota (7.6%) and California (7.6%). State and local property tax revenue dropped from FY 2007 to FY 2008 by 4.9% in Vermont, 3.8% in Texas, 2.4% in Michigan and 1.7% in South Carolina. The states that saw the lowest increases in property tax collections include Maryland (0.6%), Ohio (1.8%), Tennessee (2.0%), New York (2.3%), Iowa (2.4%), Alaska (2.4%) and Connecticut (2.9%). “When data for fiscal year 2009 are published, we can expect to see that state and local governments continued to raise property tax rates to make up for lost sales and income tax revenue during the recession, as well as lost property tax revenue from home foreclosures,” Padgitt said. The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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