Property taxes are the primary source of tax revenue for the majority of state and local governments, comprising 31.3% of collections nationwide. Property taxes support public education, police and fire protection, local government operations, and other local infrastructure. While nearly every municipality levies some form of property tax, tax burdens vary widely across states.
To determine the states with the highest and lowest property taxes, 24/7 Wall St. reviewed the effective property tax rate — the total amount of property taxes paid in 2015 as a percentage of the total value of all occupied homes — for all 50 states with data from the Tax Foundation.
Nationwide, the average property tax amounts to 1.1% of the value of the average U.S. home. Effective property tax rates range from 0.3% in Hawaii to 2.1% in New Jersey.
Unlike other major types of taxes, property taxes tend to be the principal revenue source for local government. This means taxpayers can more easily observe the services their money is funding. Discussing the local aspect of property taxation in an interview with 24/7 Wall St., Nicole Kaeding, director of special products at the Tax Foundation, said, “Sometimes individuals are willing to pay higher taxes for government services.”
A good example is education spending. In 17 of the 25 states with the highest effective property tax rates, per-pupil school funding exceeds the national average. This is the case in only eight of the 25 states with the lowest effective property tax rates.