Report: Property Tax Collections Increased Despite Decline in Home Values

Published November 15, 2010

Despite a nationwide decline in home values, state and local property tax collections increased by more than 4 percent across the nation from fiscal year 2007 to fiscal year 2008. That’s 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—had lower property tax collections in FY 2008 (July 1, 2007 through June 30, 2008).
Home Values Down, Taxes Up
“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, who co-wrote 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. Second, lagged or incorrect property assessments meant revenues continued to increase despite a drop in market value,” Padgitt said.
Nationwide, state and local property tax revenues increased by 4.2 percent from FY 2007 to FY 2008, from $1,298 in property tax collections per capita to $1,352.
Big Tax Hikes
The states that experienced the largest increases in state and local property tax collections from FY 2007 to FY 2008 are:

•    Florida (11.7 percent)
•    Indiana (11.6 percent)
•    New Mexico (10.2 percent)
•    Hawaii (9.7 percent)
•    Nevada (9.2 percent)
•    Alabama (9.1 percent)
•    West Virginia (8.7 percent)
•    Oklahoma (8.4 percent)
•    Minnesota (7.6 percent)
•    California (7.6 percent)
The states that saw the lowest increases include:

•    Maryland (0.6 percent)
•    Ohio (1.8 percent)
•    Tennessee (2.0 percent)
•    New York (2.3 percent)
•    Iowa (2.4 percent)
•    Alaska (2.4 percent)
•    Connecticut (2.9 percent)
Just a Few Cuts
State and local property tax revenue dropped from FY 2007 to FY 2008 by 4.9 percent in Vermont, 3.8 percent in Texas, 2.4 percent in Michigan, and 1.7 percent in South Carolina.
“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.
Natasha Altamirano ([email protected]) is manager of media relations at the Tax Foundation.

Internet Info

Tax Foundation Fiscal Fact, No. 243, “Property Tax Revenue Increased As Property Values Fell”: