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Which States Tax the Most/Least?

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Market Data + Trends

Which States Tax the Most/Least?

Texas is an illustrative example of a state in which home values hardly, if at all, explain real estate tax bills faced by homeowners. While Texas ranks 27th in the country for average home values, it is 10th in average real estate taxes paid.


October 7, 2021
Man kneeling beside tax guillotine
Photo: stock.Adobe.com/ Elnur

There’s much more to figuring out which states tax the most and the least than just pointing at the property tax rate.

An analysis by National Association of Home Builders economist Dave Logan compares the differences between the average real estate taxes paid by state home owners for 2019 by factoring the tax rate levied by the state with property values, which vary widely,  and the taxes charged by local taxing authorities like municipalities and school districts.  

New Jersey has the dubious distinction of imposing the highest effective property tax rate—2.13% or $21.34 per $1,000 of home value. Hawaii levies the lowest effective rate in the nation—0.31%, or $3.06 per $1,000 of value. However, this low rate combined with extremely high home values results in middle-of-the-pack per-homeowner property tax bills. At $749,707, the average home value in Hawaii is the highest of any state in the country and 52% higher than New York’s average home value ($494,375).

Interstate differences among home values explain some, but not all, of the variance in real estate tax bills across the country. Texas is an illustrative example of a state in which home values hardly, if at all, explain real estate tax bills faced by homeowners. While Texas ranks 27th in the country for average home values, it is 10th in average real estate taxes paid. Other factors are clearly at play, and state and local government financing turns out to be a major one.

Property taxes accounted for 38.9% of state and local tax receipts in 2019, on average, but some state and local governments rely more heavily on property taxes as a source of revenue than others. Texas serves as an excellent example once again.  

Unlike most states, Texas does not impose a state income tax on its residents.  Even though per capita government spending is tame compared with other states—13th lowest in the country—Texas and its localities must still find a way to fund government obligations.  Local governments accomplish this by levying the 6th highest effective property tax rate (1.60%) in the country, on average.  The state government partly makes up for foregone individual income tax revenue by imposing its corporate tax on revenue rather than income.

To see property tax metrics by state … 

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