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Showing posts from June, 2010

Understanding Property Taxes

The AARP newsletter this month has a story about property taxes that seems to share many people's confusion about how the amount of property taxes they pay is determined. Once you understand the system, you realize there is no reason to expect your property tax bill to decline when property values decline or for it to increase when property values increase.

Many people think that local governments budget like they do. First you figure out how much money you have and then you decide how to spend it. But that isn't the case. In most jurisdictions, they start the process by deciding what to spend. Local elected officials decide what services they will provide and at what cost. This becomes the basis for making a levy of taxes against local property values.

The total local budget is divided by the total assessed value of taxable property. This establishes the tax rate. That rate is then applied to each property owner's value to determine their individual tax bill. What is import…