Are property taxes too much? The early months of the global pandemic witnessed a significant uptick in home sales across the United States. In a striking development from the first quarter of 2020 to the second, the homeownership rate in the country escalated from 65.3% to 67.9%, marking the largest quarterly increase in homeownership rates since record-keeping practices were initiated in the mid-1960s. The advantages of owning a home are numerous, ranging from investment benefits to the stability and control that homeownership provides. However, with the privileges of owning a property come the added responsibilities, one of the most significant of which is the obligation to pay property taxes.
The Burden and Purpose of Property Taxes
Property taxes, particularly those levied on land and residential buildings, are typically exacted at the local level, with cities, counties, or school districts often being the entities responsible for their administration. In addition to local property taxes, state governments frequently impose supplemental taxes on personal properties such as vehicles or marine vessels.
These taxes play a crucial role in the financial health of local communities across the country, as they are typically allocated toward funding public services. These services can include schools, law enforcement bodies, and infrastructure enhancements, among others. In fiscal 2020, property taxes constituted 32.2% of all state and local tax revenue on a national scale, surpassing all other forms of tax, including sales and income tax. The proportion of tax revenue made up of property taxes varies from state to state, ranging from 16.8% to 64.0%. Therefore, it is crucial for families across the nation to budget accordingly for these tax expenditures.
The Determinants of Property Tax
The exact amount that Americans pay annually in property taxes is determined by a combination of factors. These include their local property tax rate and the assessed value of their property. For instance, if a single-family home is assessed at a value of $200,000 in a particular year and the local property tax rate is set at 1%, the property tax bill for that year would total $2,000.
Maryland’s Standing in the Housing Market and Property Tax Landscape
Maryland, with a median home value of $370,800 as reported in 2021, holds the rank of the 10th most expensive housing market in the United States. This data is based on findings from the U.S. Census Bureau’s American Community Survey. Furthermore, according to the Tax Foundation, a nonpartisan, independent tax policy research organization, the effective property tax rate in Maryland was approximately 1.05% in 2021, placing it as the 20th highest among all 50 states.
In fiscal 2020, the per capita state and local property tax collections in Maryland amounted to $1,744, slightly below the national average of $1,810. This indicates that while Maryland’s housing market is among the priciest in the country, its effective property tax rate and per capita tax collections remain more moderate in comparison to the national average.
| Rank | State | Effective property tax rate, 2021 (%) | Per capita state & local prop. tax collections, FY2020 ($) | Median home value, 2021 ($) |
|---|---|---|---|---|
| 1 | New Jersey | 2.23 | 3,431 | 389,800 |
| 2 | Illinois | 2.08 | 2,268 | 231,500 |
| 3 | New Hampshire | 1.93 | 3,285 | 345,200 |
| 4 | Vermont | 1.83 | 2,860 | 271,500 |
| 5 | Connecticut | 1.79 | 3,295 | 311,500 |
| 6 | Texas | 1.68 | 2,216 | 237,400 |
| 7 | Nebraska | 1.63 | 2,088 | 204,900 |
| 8 | Wisconsin | 1.61 | 1,717 | 230,700 |
| 9 | Ohio | 1.59 | 1,458 | 180,200 |
| 10 | Iowa | 1.52 | 1,806 | 174,400 |
| 11 | Pennsylvania | 1.49 | 1,644 | 222,300 |
| 12 | New York | 1.40 | 3,118 | 368,800 |
| 13 | Rhode Island | 1.40 | 2,449 | 348,100 |
| 14 | Michigan | 1.38 | 1,594 | 199,100 |
| 15 | Kansas | 1.34 | 1,712 | 183,800 |
| 16 | Maine | 1.24 | 2,862 | 252,100 |
| 17 | South Dakota | 1.17 | 1,606 | 219,900 |
| 18 | Massachusetts | 1.14 | 2,638 | 480,600 |
| 19 | Minnesota | 1.11 | 1,776 | 285,400 |
| 20 | Maryland | 1.05 | 1,744 | 370,800 |
| 21 | Alaska | 1.04 | 2,276 | 304,900 |
| 22 | Missouri | 1.01 | 1,114 | 198,300 |
| 23 | North Dakota | 0.98 | 1,538 | 224,400 |
| 24 | Oregon | 0.93 | 1,730 | 422,700 |
| 25 | Georgia | 0.92 | 1,336 | 249,700 |
| 26 | Florida | 0.91 | 1,541 | 290,700 |
| 27 | Oklahoma | 0.89 | 883 | 168,500 |
| 28 | Virginia | 0.87 | 1,830 | 330,600 |
| 29 | Washington | 0.87 | 1,727 | 485,700 |
| 30 | Indiana | 0.84 | 1,146 | 182,400 |
| 31 | Kentucky | 0.83 | 33 | 173,300 |
| 32 | North Carolina | 0.82 | 1,082 | 236,900 |
| 33 | California | 0.75 | 1,955 | 648,100 |
| 34 | Montana | 0.74 | 1,806 | 322,800 |
| 35 | New Mexico | 0.67 | 899 | 214,000 |
| 36 | Mississippi | 0.67 | 1,167 | 145,600 |
| 37 | Tennessee | 0.67 | 845 | 235,200 |
| 38 | Idaho | 0.67 | 1,131 | 369,300 |
| 39 | Arkansas | 0.64 | 798 | 162,300 |
| 40 | Arizona | 0.63 | 1,206 | 336,300 |
| 41 | Delaware | 0.61 | 1,049 | 300,500 |
| 42 | Nevada | 0.59 | 1,153 | 373,000 |
| 43 | Utah | 0.57 | 1,209 | 421,700 |
| 44 | West Virginia | 0.57 | 1,002 | 143,200 |
| 45 | South Carolina | 0.57 | 1,314 | 213,500 |
| 46 | Louisiana | 0.56 | 914 | 192,800 |
| 47 | Wyoming | 0.56 | 2,163 | 266,400 |
| 48 | Colorado | 0.55 | 1,956 | 466,200 |
| 49 | Alabama | 0.40 | 632 | 172,800 |
| 50 | Hawaii | 0.32 | 1,556 | 722,500 |