Even as the 2016 presidential election draws stark ideological boundary lines around the different regions of the United States, there's still one political issue on which pretty much every American can agree: they pay too much in taxes. It's a refrain you can hear from sea to shining sea, and it's a safe bet that when people start griping about their taxes, property tax is at the top of the list.
Despite the universality of the country's collective distaste for property taxes, however, there is actually a pretty wide variation in how much people actually pay on property tax each year, depending largely on where they live.
A recent study from the Lincoln Institute of Land Policy and the Minnesota Center for Fiscal Excellence put that phenomenon into perspective by evaluating total property tax exposures in over 100 U.S. cities. The results were surprising. While one might expect that luxe cities in Southern California, Silicon Valley, and New York City and its suburbs would carry the priciest property tax bills, the city with the highest effective property tax rate on a median valued home in the country is actually Bridgeport, CT. This onetime shipbuilding and industrial hub, which has more recently struggled with high crime and poverty rates, has a 3.88 percent tax rate on median valued home. Bridgeport is joined in the top five by Detroit, MI (3.81 percent), Aurora, IL (3.72 percent), Newark, NJ (3.05 percent), and Milwaukee, WI (2.68 percent).
At the other end of the spectrum, Honolulu, Hawaii has the lowest property tax rate (0.30 percent). The average tax rate for the cities analyzed was 1.503, a slight fall from a year prior (1.511).
How does that happen? One of the reasons for higher taxes in certain areas - like Bridgeport - is that there is no sales tax to offset the property tax burden. Other major drivers of higher taxes are low property values and high levels of local government spending. These explain why Detroit and New York City, respectively, have the most expensive effective commercial property tax rates in the country.
I recently spoke with Adam H. Langley, a senior research analyst in the Department of Valuation and Taxation at the Lincoln Institute of Land Policy and one of the study's authors. Langley's research has covered a range of issues related to state and local public finance, with a particular focus on the property tax. He attributed these fluctuations to a simple case of cities adjusting tax rates to reflect differences in their tax base.
"The number one factor driving rates is property values, as cities with low property values like Detroit need high property tax rates to bring in tax revenue," he explained. "Research shows pretty definitively that property taxes are capitalized into property values, but you have to account for the cost and the quality of local services provided by municipalities as well since better schools and safer streets are also reflected in property values."
So how does that move the needle when it comes to determining where people ultimately settle? We know that some states without income tax, Florida in particular, are attractive to wealthy citizens. The state accounts for 20 percent of millionaire migration in the country. But what about the everyday worker that is looking to get the most bang for their buck when it comes to real estate?
"Research shows that taxes aren't the number one determinant of where people move," Langley said. "Family connections, economic opportunities, even the weather are larger factors. But when choosing a jurisdiction within a metropolitan area, there are differences in the regions in those packages of services."
So, while property taxes don't necessarily drive the decision to live in one city over another, they can heavily influence residents' perception of local government and where they land on any number of political issues, from voting for or against school budgets to which national politician they favor.
"People are definitely more aware of what they're paying in property taxes than what they're paying in sales taxes, for example," Langley said.
Because of their unique positon at the front-and-center of our collective tax consciousness, property taxes are the scapegoats of the tax world, a catch-all for gripes about potholes, traffic tickets and anything else that ails a local economy. But if you ever find yourself lamenting your property taxes among friends, make sure they aren't from Bridgeport or Detroit because they've got you beat in the complaint department.