Property taxes are levies, which are issued by the government on both a person’s real and personal property. The home or property is assessed to get its value and that value is then taxed. The tax amount is determined through multiplying the fair market value of the property by the present tax rate.
A property tax is also referred a realty tax since it is most often levied against real estate. There are also various kinds of these kind of taxes, like personal property tax and usually assessed and charged separately from real tax which includes personal possessions such as cars, motorcycles, boats and campers.
Local governments like counties and cities derive income from taxes from properties.It is usually used for government administration and expenses for first responders like law enforcement officers, paramedics and fire fighters. Furthermore, it is also used to fund local courts and helps pay for services like parks, community programs, libraries, civic centers and schools. School districts often receive large portion of real taxes.
The advantages of this kind of tax includes the following:
1. It is administratively and technically possible to introduce and maintain in almost all circumstances.
2. Cheaper to administer and it is possible to aim for a cost yield ration of two percent or even less.
3. It is hard to avoid or evade and the collection success rates of ninety-five percent is easily achieved.
4. Real taxes are transparent.
5. The public understand the concept of the market value and thus appreciate the assessment basis.
6. There is good relation between the assessed value and the capacity to pay.
7. The tax can be marginally progressive if correctly designed.
8. Revenues are buoyant and predictable.
9. It is well suited as a source of locally generated income for the local government.
The disadvantages of taxes on properties include:
1. It is not perfect and often not popular. However, one should keep in mind that there is no such thing as a perfect tax and taxation is never popular.
2. The transparency of the tax reveals inconsistencies, which could be magnified in public perception.
3. The confidentiality of property taxes hides the actual results of the assessed value.
In this kind of tax, every parcel of land or real property is assessed regardless of its size. It includes the land and all permanent structures attached to the land. While all real taxes are assessed, not all of it is taxable. Some, like religious or government owned properties are totally exempt from paying property taxes. Other properties are partially exempted from paying property taxes such as war veterans who qualify for an exemption on part of the property tax on their properties or homes and those homeowners who qualify or are eligible for the School Tax Relief or STAR program.
The tax rate is determined by the amount of the tax levy and has several steps to determine the levy. First, the taxing jurisdiction develops and adopts budget revenue from all sources aside from the property tax. These revenues are then deducted from the original budget and the remaining becomes the tax levy.