Property tax

GDP per capita PPP vs property taxes 2016

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Property taxes by county

Tax-delinquent apartment rental building in Santa Fe, Dasmariñas, Cavite

Property tax is a form of tax levied by governmental jurisdictions on the real estate owned by individuals and businesses. Unlike income tax or sales tax, which are based on income earned or goods purchased, property tax is based on the property value of land and buildings. This tax is a major source of revenue for local governments, funding essential services such as public education, police and fire departments, and infrastructure maintenance.

Overview

Property tax is assessed by local government entities, such as counties, cities, and townships. The tax rate, often referred to as the mill rate, is determined by dividing the total amount of revenue needed by the local government by the total tax base, which is the combined value of all taxable property within the jurisdiction. Property values are typically determined by property appraisals, which aim to estimate the market value of properties based on factors like location, size, and the condition of the property.

Calculation

The calculation of property tax involves several steps. First, the property is appraised to determine its current market value. Next, the local tax rate is applied to the assessed value. In some jurisdictions, there may be exemptions or reductions available for certain types of property owners, such as veterans, seniors, or those with disabilities, which can lower the effective tax rate.

Types of Property Tax

There are generally two types of property tax: land tax and improvement tax. Land tax is based on the value of the land itself, without considering any buildings or structures on it. Improvement tax, on the other hand, is based on the value of the buildings or other improvements made to the land. Some jurisdictions may tax these separately, while others combine them into a single tax bill.

Appeals and Disputes

Property owners have the right to appeal their property tax assessments if they believe the valuation is too high or if they are eligible for exemptions that were not applied. The appeals process varies by jurisdiction but typically involves submitting a formal appeal to a local assessment board for review.

Impact on Property Owners

The impact of property tax on property owners can vary significantly. For homeowners, property taxes are a significant part of the cost of owning a home and can influence decisions about buying or selling property. For businesses, property taxes can affect decisions about where to locate or expand operations. High property tax rates can discourage investment in certain areas, while low rates can attract businesses and residents.

Challenges and Criticisms

One of the main criticisms of property tax is that it can be regressive, impacting lower-income property owners more heavily than wealthier ones. Additionally, the reliance on property taxes for funding local services can create disparities between wealthy and less affluent communities, affecting the quality of public services such as education.

Conclusion

Property tax plays a crucial role in funding local government services. However, its application and impact can vary widely, leading to ongoing debates about fairness, efficiency, and the best methods for assessing and collecting these taxes.