Property tax is a tax collected from the owners of buildings, land, and other taxable property, including business equipment and inventory. Some governments also collect taxes from the owners of such property as stocks and bonds.
Property taxes provide much of the income of cities, counties, towns, and school districts in the United States, Canada, and many other countries. Local governments depend on these taxes to help finance education, police and fire protection, street repair, and other services. Some state and provincial governments also collect property taxes.
The government of a community sets an annual tax rate to determine each property owner’s tax bill. This rate is a percentage of the assessed (estimated) value of the property. In many cases, the assessed worth is less than the property’s market value. For example, a house might have a market value of $100,000 but be assessed at only $60,000. If the tax rate were 5 percent, the annual property tax would be $3,000. See Assessment .
The major problem with property taxation is that much property is not assessed fairly and uniformly. Another drawback is that assessments and rates change too slowly to keep up with rising prices. In times of rapid inflation, assessments have often fallen far behind market values. Some people oppose property taxes because they believe property ownership is a poor measurement of ability to pay. But others argue that property owners are the people who benefit most from community services, and so they should pay more for these services. In 1978, California voters approved a measure, called Proposition 13, that reduced state property taxes. Several other states soon enacted similar laws.
