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