REE3043 Chapter 19

Tax base

all of the taxable properties in a jurisdiction

all of the following were taxes used in common use in the british colonies of north america except:

consumption tax

Property taxes may be evaluated on the basis of

efficiency and equity

the right of the owner to pay unpaid taxes plus interest and penalties prior to the public sale of the property and therefore reclaim full title to the property is known as:

equity of redemption

The Effective Tax Rate

is defined as: the actual tax paid / the property's market value

The tax on real estate represents the

largest single source of revenue for most local governments

Regressive taxes:

lower income households pay higher taxes than higher income households, relative to their income

homestead and other exemptions

properties that may receive partial exemptions include: homesteads, agricultural properties, and properties owned by seniors, veterans, and disabled individuals. * the homestead act does not apply to vacation homes, it only applies to homestead whre you live

the regressive nature nature of property tax:

property taxes tend to be regressive

vertical equity

refers to properties of different market values being assessed at the same percentage of their market value

Horizontal equity

refers to properties of the same market values being assessed at the same percentage of their market value

What jurisdiction typically levy real property taxes?

school districts

Special assessments

taxes levied to finance special improvements to benefit property owners. for ex, property owners in a subdivision could receive a special assessment to install sanitary sewers.

Vertical equity

the conomic principle that persons in different economic conditions and situations should be taxed and otherwise treated proportionately to their different circumstances,

Horizontal equity

the economic principle that persons similar conditions and situations should be taxed or otherwise treated the same.

progressive taxes:

the more money you make the more you pay

Calculating an Individual's Tax Liability

the tax accessor (or county property appraiser) appraises all taxable properties in a jurisdiction for property tax assessment. The assessed value is always related to a property's market value

Adressed value

the value determines the basis on which a property owners tax is calculated. It is usually a percentage of market value.

A tax rate of 23.6 mills applied to a nonhomestead property (assume the homestead exemption is $25,000) assessed at $103,500 would require the owner to pay property taxes of:

$2,442.60

A tax rate of 26.52 mills applied to a homestead property (the homestead exemption is $25000) assessed at $254,120 would require the owner to pay a property tax of:

$6,076.26

potential disadvantages of the property tax:

- increased property taxes may lower values through tax capitilization -property taxation of improvements may inhibit new construction -may inhibit maintenance and rehabilitation -property taxation may induce premature development of land

potential advantages of the property tax:

- it is capable of raising large amounts of revenue because of the large tax base -it cannot be easily hidden to avoid taxation -the value of a property can be established for a low cost -the property tax discourages land hoarding -the base revenue tends to keep up with inflation

In the British colonies of North America the following five types of taxes were in common use:

1. the poll tax (flat tax on all male adults) 2. the property tax (typically not related to value) 3. the faculty tax (tax on a person's trade) 4. the import tax (on goods imported and exported) 5. the excise tax ( on some consumption good such as liquor)

What is the tax rate for a community with a budget for the coming year of $560 million? Income from nonproperty tax sources is expected to be $115 million and the net taxable base is $26 billion.

17 mills

The U.S. property tax system was derived from the

English system

T/F A property owners effective tax rate is defined as the tax paid ( or owed) divided by the taxable value of the property.

FALSE. Effective tax rate is tax paid (or owed) / market value of the property

T/F Property taxes are generally viewed as progressive, because lower-income households may pay lower property taxes than high income households relative to their incomes.

FALSE. Property taxes are regressive.

T/F Some sates allow homeowners to deduct specified amounts form their home assessments before calculating their property tax bill. The largest of these deductions is generally the disability exemption.

FALSE. The largest exemption on residential property taxes is generally the HOMESTEAD exemption, offered on owner occupied homes.

T/F In most jurisdictions the local tax assessor is hired by the local county commission (or board of advisors.)

FALSE. The tax assessor (or county property appraiser) is an elected government official.

T/F In the US property taxes can only be levied by county gov, all other govs cannot raise funds via property taxes.

FALSE. While the federal gov may not levy taxes, other gov bodies (state and city) may be able to do so.

Ad valorem taxes

Property taxes are levied on real estate based on their assessed values. ( i.e. according to value)

Which of the following jurisdictions typically levy real property taxes?

School districts *cities, counties, school districts, urban service districs, water management, services typically levy taxes

T/F In states where tax certificates are issued, to avoid losing the property the owner must pay back the owner of the tax certificate the amounts advanced to pay both the tax and interest.

TRUE

T/F One criticism of property taxes is that they are not necessarily related to an owner's ability to pay.

TRUE

T/F Tax capitalization is the term that suggests that increases (and decreases) in property taxes may serve to reduce (or increase) preoperty value.

TRUE

T/F While most countries tax both land and the improvemtns, some countries such as Denmark and Argentina tax only the value of the land.

TRUE

T/F A jurisdiction's tax base is equal to the total value of the jurisdictions taxable property.

TRUE.

Which tax represents the largest single source of revenue for most local governments?

Tax on real estate property

Special Assessments:

a tax charged to property to help pay for a local improvement that directly benefits the parcel ex: building a sidewalk that passes infront of your house