Real Estate

Who Pays America's Highest Property Taxes?
Forbes.com
staff, 01.23.09, 02:00 PM EST

With the highest annual levies, these 25 counties eat up
homeowners' incomes the most.

In
Depth: Who Pays America's Highest Property Taxes?

Behind the manicured shrubs and stately single-family homes lining the
streets of Garden City, N.Y., a 21,672-person town about 20 miles east of
Manhattan, lies a harsh truth--high property taxes.

Nassau County homeowners pay a median $8,153--or 8% of their yearly
income--to live there. It's the fourth-highest rate in the country.

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Those living in Little Falls, N.J., should be so lucky. Property taxes in Passaic
County, which includes Little Falls, eat up 8.5% of homeowner median
incomes. In fact, Passaic property taxes are the highest in the nation. Rounding
out the top five: Union
County, N.J. (8.1%), Essex
County, N.J. (8.1%), and Westchester
County, N.Y. (7.8%).

In
Depth: America's 25 Highest Property Taxes

Besides boasting the nation's five highest property tax rates, all are New
York City bedroom communities. This is not a coincidence. Mid-Atlantic and New
England states have traditionally been most reliant on property taxes because
they have strong, local governments that are able to levy property taxes to pay
for their independent municipal needs.

"The key in New Jersey especially," says David Brunori, a professor of public
policy at George Washington University, "is that local governments don't have a
lot of options in terms of revenues. There is no local-option sales tax, no
local-option income tax."

Further north, in Cheshire County, N.H., homeowners at the $62,577 median
level fork over 6.4% of their earnings in taxes. Partly to blame is the state's
lack of a broad-based tax. Instead, it relies on property and business taxes to
fill its coffers.

Counties in Southern states like Louisiana and Alabama boast low rates--below
1%--in part because those states have local governments with little local
autonomy. There is less reliance on the property tax because it is considered a
local tax.

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Behind the Numbers
This list is compiled with data from
the Tax Foundation, a Washington, D.C.-based nonpartisan tax research group.
Using statistics from the 2007 U.S. Census American Community Survey, it
calculated, by county, median property taxes paid on homes, median home value,
taxes as a percentage of home value, homeowner median income and taxes as a
percentage of income. Our rankings are based on the last measure. Click
here for the full list.

Just
Cut Property Taxes!

Lowering property taxes would do more to
keep people in their homes than any government rescue plan.

These numbers are a time-honored touchy subject among homeowners. But today's
weak real estate environment adds an extra layer of angst. In the New York City
metro area alone, median home sale prices are down 7.5% from last year and 19%
from two years ago.

This means that while home values continue to fall due to foreclosures, a
lack of credit and a dearth of buyers, for many homeowners, property taxes still
reflect inflated prices. Across the country, the values counties use to
calculate tax bills might be based on assessed values of a year earlier. Indeed,
many of today's bills reflect values of a year ago.

In Nassau, for example, where home values are assessed yearly, the April 1,
2008, assessment applies to bills facing homeowners from the '08-'09 fiscal
year, or October 2008 through September 2009. Homeowners will be paying taxes on
the Jan. 2, 2009, assessment for the 2010-11 fiscal year.

Still, as values fall, yearly property taxes do eventually fall in line with
falling property values, and homeowners eventually see their balances drop. The
rub: Local governments need tax revenue for everything from school district
expenses and libraries to police, fire and ambulatory services. That means if
tax revenue falls too much, local property tax rates are often raised to account
for the budget deficit that results.

As a result of this specter, some are crying foul. Angry homeowners, whose
tax bills are rising despite dropping home prices, have prompted lawmakers in
New York, Georgia, Oklahoma and Wyoming to consider proposals to cap property
taxes as a percentage of a home's value.

"People are unhappy that their bills are increasing," says Kim Rueben, public
finance economist at the Urban Institute. "Now that values are falling, they
want their bills to fall."

In
Depth: America's 25 Highest Property Taxes

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