What Do Your Property Taxes Pay For?

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How many times have you looked at your tax bill, threw your arms in the air, and yelled our “where is all this property tax money going, this is way too high?!?”

Maybe I’m the wacky one, but I’ve done that.  (Actually, I would probably have an expletive or two in there.)

The problem with that view though is that property taxes are never a single number, but a combination of several.

Most of us tend to think our property taxes are too high, but then we get a bit hung up on the components.  We may want a lower tax bill, but at the same time we might support high spending levels in certain areas, or even just one in particular.

There are constituencies behind each category of our property taxes, which is why it’s so hard to get lower taxes overall.

So What Do Your Property Taxes Pay For?

What do property taxes pay for?

Public schools

This is the largest single line item in nearly any property tax bill.  (It is for us.)

In fact, it’s usually greater than 50%, and much higher still in areas with large student populations or a strong local commitment to providing a premium education.  Such a commitment often leads to higher local property values since areas with higher rated schools generally command higher house prices.

Public school systems get their funding from a variety of sources—federal government, state government, fund raising efforts—but the largest source is generally from property taxes.  This is also why any tax reduction attempts meet strong resistance from both school employees and parents of school-aged children.

Maintenance of public roads and parks

Most of us drive, and when we do, we like to do it over well maintained roads.  Unless you prefer off-roading it to the local grocery store.

We also may like to walk, jog, picnic and otherwise play in public parks.

Having all of that costs money, and that money comes mostly from our property tax bills.

In some areas, property tax bills may also include certain utility costs if they’re provided by the county or municipality.  This can include water and sewer or garbage collection.  Tax bills may be higher in communities that provide utilities through public systems, but they’re also providing more services.

Government administration costs

In most communities government administration is a relatively small part of the local budget, but it also covers a lot.  It includes not only salaries and benefits for municipal administrative staff, but also the buildings that house them.

Police, public safety, and libraries

property taxes

Ever wonder what all that property tax money went to?

Despite the fact that many of us think that police budgets are paid mostly with traffic citations, most is actually provided through property taxes (OK, let’s say in most jurisdictions and leave it at that!).

Again, this includes not only salary and benefits for police and support personnel, but also the acquisition of buildings and police cars.

Just as with a high local commitment to schools, a strong police presence can often have a positive influence on property values.

Two services that meet little resistance on the tax side are fire protection and public libraries.  They’re not usually large parts of a typical tax bill, but both are considered highly desirable in most communities and largely beyond political haggling.

Can you imagine any politician running on a platform that includes cutting fire protection and public libraries?

Municipal allocations

Both municipalities and counties rely primarily on real estate tax revenues to support their operations so taxes are usually collected and paid to both.

While this may be evident in many cases, it isn’t always.

In many jurisdictions, one government agency may collect the tax under a single bill, then apportion the funds based on a predetermined formula.  You may pay your taxes to your municipality who later forwards the required portion to your county.

There are however arrangements where the municipality and county each send out separate tax bills.

How your tax bills get paid

No matter what the arrangement, if you have a mortgage, chances are that your lender pays your property taxes through your loans escrow account and you never see a tax bill.  Many people never become aware of the allocation until their mortgages are paid off and they become directly responsible for paying the taxes themselves.

Whether you pay your property taxes through your mortgage lender or directly to the local tax authorities, you should receive a copy of the bill at least once each year.

When you do, take a few minutes to study the bill and in particular the list of allocations.  That will be the best starting point to get at least a general idea where your property tax dollars go.  From there you can get more detailed information.

Note: Hold onto at least the last copy of your tax bills.  You never know when you might need it.  For example, we needed a copy of our last school bill in order to register our son for kindergarten (yeah, they want to make sure you are paying your share before you can register).

Sometimes a property tax bill is all it takes to get us more involved in local government.  Paying money has a way of getting us to do that.

What do you think about your property taxes?  Are they too high?  Too low?  About right?  What do you wish they’d spend more on?  What do you wish they’d spend less on?

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Published or updated April 28, 2014.

Comments

  1. You really need the property tax bill when you register the kid in school? That’s kind of crazy. What about renters?
    Our property tax bill is high, but I think it goes to a good cause. Public school is good in my area so I can’t complain too much.

    • Renters need a letter from their landlord I believe. I’m not sure if it needs notarization or what else.

      Our school system is pretty good too so we’re getting what we pay for. I think having the tax bill keeps the money going to those who have contributed taxes.

      Some other places you could use your tax bill: joining the pool club and joining the little league. The tax bill isn’t necessary but it is one of the proofs they accept to join/signup.

    • Carol Akiyama says:

      Maybe I’m confused… but, I am under the assumpton that schools are paid through the state lotteries? On the TV commercial it says: 100 percent of monies generated from the lottery goes to schools… Why is it that our Property Taxes are being used for this purpose?? Also, it states in there as well, Property Taxes pay for Roads? Then where does the Gasoline taxes go, if not for the roads, like they say!?! Someone needs to look into this Double Dipping crap! I will…just allow me to look at the books!

      • The state lottery money may be going to schools but it doesn’t mean that schools are funded 100% by the lottery. There’s Federal, State, and local money that goes to schools. By me each town has their own school district and each has their own tax structure. It’s not so much dipping dipping as it is a town/city/village supplementing money they get from the state and country.

  2. As a public school teacher, I realize I am funding my salary. I would like to give me a raise. I wish our elected officials managed their (our) money better.

    • I hear you. But at least at the local level we have more control on where our tax money goes. We can get involved with school votes to see where spending is made and attend city council meetings to discuss budgets and needs.

      • Glen,

        In my locality the ‘powers that be’ are so ingrained(20+ years) that whatever ‘control’ the average person is supposed to have is nothing unless you give into the ‘machine’ so to speak.

        It’s a very hard fight that few people(myself included) have the stomach to last. We(citizens) are fighting for a few thousand dollars. The powers are fighting for their livelihoods and the livelihoods of friends and family. The commitment level is not even close.

        -Nate

        • That has to be a hard thing. Continue to make your voice heard. Hopefully others in your community will see the light.

        • You nailed it. These “public servants” are by definition unfit for the responsibility BECAUSE THEY ARE NOT YET at the point in their own lives where they have gotten their finances together nor are their lives stable so therefore they don’t know what it takes get there as an individual a family let alone a larger social group. so they’re grasping at straws & taking a stab at economic and social theory nothing proven by their own experience. NO WISDOM.
          I’m not saying a young person cannot have wisdom but generally speaking…
          these positions should be earned and they should be held in high esteem and have nothing to do with financial compensation.

  3. WAY TO FREAKING HIGH! I feel there is a certain amount of waste in all levels of government, and I have this unnerving feeling that if we could just eliminate that waste things would be so much better for everyone.

    Sort of like too many people playing with other people’s money and choosing the selfish box in Game Theory.

    • I agree. Way…too…high. Some taxes you can see how you get what yu pay for, like education, but other things….

      Where do we cut the waste? What gets determined as waste? What politician is willing to be the one to step up and cut the fat?

      Government has become too much of a career and not enough of an obligation you do and get out. Is it just me or are there a lot of elected officials that are related and have family in other positions?

  4. Depressingly, Toronto’s current mayor Rob Ford favours closing libraries in order to reduce taxes. I guess he fears that all that reading might make people too smart to re-elect him…

  5. I am renter. I don’t pay this. Where do you think sales taxes go. They don’t come to city and neighborhood level?

    • Well, if your landlord is smart then you are paying property taxes, just not directly. Your landlord’s property taxes should be priced into your rental amount.

      • Glen is right. I’m a landlord and the mortgage, interest, property tax, insurance, and maintanence costs are all built into the rent.

        • uclalien says:

          @I Am 1 Percent
          In some locations, the market rental rate for a property is sufficient to cover all expenses. In others, this definitely isn’t the case and may take years or decades to reach that point (if ever).

          The fact is that input costs have nothing to do with the price of a product (be it an entire house or a single brick). The market (supply and demand) determines the price of goods, not the inputs.

          However, any landlord with his salt knows that he better cover permanent recurring costs (property tax, insurance, maintenance) at a minimum. Otherwise, it’s just a money pit. But he doesn’t necessarily need to cover his mortgage costs, which should eventually go away.

  6. In many parts of New England at least, we can still have direct involvement in our property tax rate. The planning and budgeting process is transparent — public hearings are held. In many towns, you still have the opportunity to propose amendments to the budget that can be voted on. Not only that, but it’s often not that hard to get yourself elected to the local board that controls the budget. I know people who have won a seat with a dozen or so write-in votes.

  7. I think our taxes are about right, or could be a little higher. I typically vote yes when a referendum asks for more money to pay for the increased cost of operating the local libraries, or more money to schools. Our property taxes do go to fund all the things you listed.

    • uclalien says:

      Just be careful to realize when the additional tax revenues won’t actually benefit the stated source. In many cases, public officials state that schools will lose funding if Measure X doesn’t pass. But in reality, the schools get no more funding than the would have without the new tax. Instead, the tax collections from Measure X go to schools and funds that would have gone to schools get diverted to less popular project. It happens time and time again.

  8. Property taxes are too high. No one really owns their home any more. Don’t pay the taxes and you will soon discover the true own. THE STATE!!!
    Your property taxes help to pay the bills of state government. Many of the services are very important, even vital. However, nothing gets done efficiently. How much is waste and corruption. Who knows? My guess is about 35 percent. The nature of bureaucracy is to increase itself for its own sake, not the public interest.
    Your property taxes go to support the special interests,( both left and right) that spend lavishly to maintain their privilege. Your property taxes should be a lot lower. It’s the only way to check the greed of the bureaucrats.

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