III. Common Types of Local Government Taxes

• Library: Municipal Law Deskbook (ABA) (2015 Ed.)

III. COMMON TYPES OF LOCAL GOVERNMENT TAXES

A. Property Taxes

Property taxes are imposed by many local governments. Property taxes are usually imposed on the value of real or personal property and are usually collected annually.

Property taxes have been the focus of considerable citizen concern, and individual states have enacted a wide range of different constitutional amendments and statutes that are designed to limit property taxes and increase their perceived fairness. Nationally, the most well-known property tax limitation may be Proposition 13, a California state citizen initiative that amended the California constitution in 1978 to limit property taxes.

As with most of the issues discussed in this chapter, practitioners must make sure they understand the state constitutional provisions, state statutes, and local government actions that are associated with their particular property tax. Significant features of many property tax systems are described next.

1. Valuation

Property taxes are usually imposed based on the value of real or personal property (these taxes are often called ad valorem taxes). The value of property that is used to impose a property tax is often called the "assessed value" of property. The process for determining assessed value is usually prescribed by law, and the assessed value of property may not have a direct relationship to its current market value.

For example, California's Proposition 13 lowered assessed values and limited increases in assessed value to 2 percent each year unless the property is sold or has new construction. This type of system can result in similar properties in the same area having significantly different assessed values and paying significantly different amounts of...