Assessing Property Taxes
The point in creating the property value estimated by the assessor is to determine how much tax to levy against a property owner. Property taxes are usually of vital importance for the local government's budget. They pay for services like schools, law enforcement, fire and ambulance services, and parks. But how does an assessor calculate property taxes?
The most commonly used system of taxing is the rate system. On sales taxes, for example, the state collects an established, stable rate per dollar. So a one-dollar candy bar actually costs $1.07 in a state where the sales tax is 7 percent. The fluctuating amount the state collects through the sales tax depends on the dollar value of goods sold in the state that year.
This isn't the case with property taxes, which use a budget-based system of taxation. Under this system, legislators determine how much money their county will need to pay for the services that municipalities use property taxes to cover. When the legislators determine how much money will be needed, it's up to the tax assessor to divide the amount among the tax base -- in this case, the property owners in the county [source: Guppy].
The tax levied against real property is a percentage of the total tax amount legislators collect. So while the values of homes and businesses may change, the amount the county collects doesn't fluctuate based on these values; the property tax a homeowner pays does. When all property owners have paid the tax, the sum should equal the amount the legislators decreed should be levied against the county as a whole.
Usually the property tax is expressed in dollar amount per hundred or thousand dollars of a property's value. If the tax is one dollar per $100 of value, the property tax levied against a home valued at $108,000 will be $1,080 ($108,000 / $100 x $1) [source: State of Maryland].
You can see how fairness and accuracy are big parts of a county assessor's job. An overvalued home means a property owner will pay more than he or she really owes; undervaluing a property means that the county may fall short in its revenue projections.
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Related HowStuffWorks Articles
- County of Santa Cruz. "What does the assessor do?" Accessed March 22, 2010.http://www.co.santa-cruz.ca.us/asr/asrresp.htm
- Epstein, Edward Jay. "What was lost (and found) in Japan's lost decade?" Vanity Fair. February 17, 2009. http://www.vanityfair.com/online/daily/2009/02/what-was-lost-and-found-in-japans-lost-decade.html
- Guppy, Paul. "Are your property taxes going up? Don't blame the tax assessor." June 26, 2002. http://www.kingcounty.gov/~/media/Assessor/News/OpEd6_26_02.ashx
- Los Angeles County. "Real property assessments." Accessed March 22, 2010. http://assessor.lacounty.gov/extranet/Guides/realprop.aspx
- Retirement Living Information Center. "Taxes by state." January 2010. http://retirementliving.com/RLtaxes.html
- State of Maryland. "SDAT: homeowner's guide." July 27, 2009. http://www.dat.state.md.us/sdatweb/hog.html