Introduction to the Property Tax

Introduction to the Property Tax presents resources designed to promote understanding of basic property tax functions and their importance as a revenue source for local government. Explainer videos explore the mechanics of how the property tax works and use real life examples to demonstrate the significance of the property tax in government finance. Other publications discuss considerations for policymakers and clarify certain important aspects of property taxation.

Videos

Property Tax 101: Why the Property Tax

Why is the property tax the bulwark of local government finance? What is the role of state aid in a healthy property tax system? This video explores these questions and more through the experiences of two Massachusetts municipalities with very different socioeconomic makeups: Arlington and Lawrence.

Property Tax 101: The Mechanics

This explainer video walks through the mechanics of how the property tax works and why it is stable and effective.

Publications

Property Taxes: What Everybody Needs to Know
Ronald C. Fisher

The property tax is the largest single source of revenue under the control of state or local governments in the United States. Property taxes provide a fundamental fiscal foundation for all types of local governments, but structural characteristics that make the property tax different from other types of taxes can lead to confusion and misunderstanding. This paper helps to inform the public about the property tax by examining its importance to local governments, how the property tax impacts homeowners, and how property tax burdens are distributed.

Property Tax Relief for Homeowners
Adam H. Langley and Joan Youngman

This report is the go-to resource on the options that U.S. states have to provide property tax relief for homeowners without compromising municipal fiscal health or services. Policy makers frequently face political pressure to reduce property taxes, but many approaches undercut the success of adopted policies. The authors present the pros and cons of measures that can effectively provide relief without undermining the property tax system. By covering the full range of policies, this report is relevant in practically any state policy debate about property tax relief. This report will be an essential resource for state legislators, governors, students of public finance, and policy makers who help make decisions about property tax relief.

Online Courses

Successful Property Tax Reform: The Case of Massachusetts

This course examines the deep problems of the Massachusetts property tax in the 1970s and the subsequent reforms that created one of the most functional and fair systems in the United States. Course modules explore the state of the property tax system prior to reform; events leading up to the tax revolt and the assessment reforms; and elements of the reform that resulted in the state’s current well-functioning property tax system.

Foundations of Local Government Finance in the United States

This online, self-paced course provides an overview of how local governments in the U.S. raise and spend money. It illuminates the often-misunderstood system by which communities pay for public services and infrastructure—from schools to clean water to sidewalks—that are foundational to a high quality of life. Relevant modules include: Overview of Local Revenues (Module 3); The Property Tax (Module 4); and Economic Development (Module 5).

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Introduction to the Property Tax–School Funding Connection

Property taxation and school funding are closely linked in the United States. Forty-five percent of total public K–12 education revenues come from local governments and 80 percent of the local share comes from property taxes. In a well-structured school finance system, both major funding sources—property tax and state aid—will ensure that schools can provide an adequate education for all students equitably and efficiently.

Introduction to the Property Tax–School Funding Connection presents resources designed to promote basic understanding of the relationship between property taxation and public K–12 education funding.

Publications

Policy Focus Reports

Rethinking the Property Tax–School Funding Dilemma
Daphne A. Kenyon, Bethany Paquin, and Andrew Reschovsky

This report updates The Property Tax–School Funding Dilemma, a Lincoln Institute Policy Focus Report published in 2007. It describes the joint role of the property tax and state aid in funding public K–12 education, analyzes the strengths and weaknesses of each funding source, presents case studies of five states, and concludes with a dozen recommendations. Some recommendations seek to make the local property tax more equitable and efficient; others suggest ways to improve state aid.

Working Papers

What Makes a Fair School Finance System?
Andrew Reschovsky

This working paper explores the complexities involved in defining fair and equitable school funding. In defining fairness, state policy makers must address several issues such as differences between taxpayer equity and student equity, equity of educational inputs versus educational outcomes, and the question of placing limits on the education spending of property-wealthy communities. The author defines five different goals that have driven school funding policies over the past 50 years.

Designing School Aid Formulas to Achieve High-Quality and Equitable Education
Andrew Reschovsky

A companion to What Makes a Fair School Finance System, this paper describes the school funding formulas necessary to achieve five broad funding goals that have driven school finance policies over the past 50 years. It explains the formulas state governments use and highlights two states, one with a successful funding system and one that is less successful in achieving its funding goals. The paper recommends ways to design state school aid formulas to achieve high-quality and equitable education.

Effects of Reducing the Role of the Local Property Tax in Funding K-12 Education
Daphne Kenyon and Semida Munteanu

Between 1989 and 2018, 24 states increased their reliance on the local property tax, while 25 states decreased theirs. This paper reviews the literature on school funding and business cycles and the effects of revenue volatility on education outcomes. It also explores the experience of four states that decreased reliance on the local property tax (Michigan, Kansas, South Carolina, and New Hampshire), analyzing the impact on school funding during recessions, the level and growth of per-pupil school spending, and the equity of per-pupil school spending.

New Hampshire: Heavy Property Tax Reliance on Longstanding School Finance Litigation
Semida Munteanu, Bethany Paquin, and Sydney Zelinka

New Hampshire does not levy a broad-based sales or income tax and therefore is the state most reliant on property taxes. In 1999, New Hampshire dramatically changed its system of school aid and implemented a statewide education property tax (SWEPT), which is levied and retained by local governments. Although the SWEPT was adopted to meet the state’s requirement for funding an adequate education, the state has been subject to numerous school finance lawsuits about the inadequacy of state aid. This paper explores New Hampshire’s unique tax structure and its role in funding public K–12 education, describes the history of school finance litigation and legislative response, analyzes what adequacy and equity mean for state school finance systems and student achievement, and considers options for improving school finance equity.

Land Lines Articles

Public Schools and the Property Tax: A Comparison of Education Funding Models in Three U.S. States
Daphne Kenyon, Bethany Paquin, and Semida Munteanu

This article is excerpted from the Lincoln Institute Policy Focus Report Rethinking the Property Tax–School Funding Dilemma, and from a Lincoln Institute working paper,  “Effects of Reducing the Role of the Local Property Tax in Funding K–12 Education.”

Webinars

Webinar Series: The Property Tax-School Funding Connection

This webinar series explores the experience of three states that have enacted various types of property tax limitations and their efforts to ensure continued adequate funding for public education. Presenters from each state assess the effectiveness of those efforts and suggest possible policy reforms.

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Property Tax in Latin America

Property tax has been introduced in a large majority of countries, but is structured and administered in a great variety of ways in different jurisdictions. Little information is currently available regarding the performance of property taxes in Latin America. More importantly, even the public authorities of these countries have difficulty bringing together knowledge of the main characteristics of the systems and of the reform initiatives that are underway.

In order to contribute to the organization and dissemination of information in this area, published are the results of a study involving a comparative analysis of property tax in Latin America. The study is financed by the Lincoln Institute of Land Policy.

The relevance of the study resides in the fact that it will help increase awareness of the ways in which property tax is administered in Latin America. The comparison between countries, regions and localities is significant to the degree that it contributes toward the identification of areas where improvements need to be made. It is important to note that the systematic internal evaluation of the tax is essential for an understanding of the factors that lead to changes in its performance in different periods, thus allowing for the monitoring of governmental activity by public agencies and civil society.

The data collected, the results of the analyses carried out, and the links to access the legislation that refers to the different jurisdictions investigated are available here. The expansion of the database will be carried out through the incorporation of new members to the network, and the updating of the data of each jurisdiction must be carried out, on an annual basis, by the members of the network. The information referring to the past will be stored, to allow the study of the evolution of existing systems. Access to the analyses, aggregate data, legislation and other available materials will be maintained.

Lincoln Institute Vertical Equity App

Vertical equity in property tax assessment requires that assessment levels remain consistent over the range of real estate values, with high-value and low-value properties exhibiting the same ratio of assessment to market value.

On a national level, findings of widespread vertical inequity in property tax assessments—with low-priced properties assessed at a higher percentage of market value than high-priced properties—have challenged assessment offices across the US to measure and evaluate the level of vertical equity in assessment rolls.

The Lincoln Institute of Land Policy Vertical Equity App is designed to provide assessment offices with the capacity to undertake this statistical study and the ability to communicate the results effectively. It allows assessors to easily analyze vertical equity using six different approaches:

• assessment to sale ratio (ASR);
• coefficient of dispersion (COD);
• price related differential (PRD), the price related bias (PRB);
• Spearman’s rank order correlation; and
• Gini measures.

Graphic displays and an overall summary allow these results to be shared and communicated more easily than would be possible with computational data alone.