Property taxes are the primary tool for financing local government and generate state-level revenue in some states as well. In fiscal year 2019, property taxes comprised 31 percent of total state and local tax collections in the United States, more than any other source of tax revenue. In that same year, property taxes accounted for 72 percent of local tax collections and 27 percent of overall local government revenue.
The six counties with the highest median property tax payments all have bills exceeding $10,000—Bergen, Essex, and Union Counties in New Jersey, and Nassau, Rockland, and Westchester counties in New York. All six are near New York City, as is the next highest, Passaic County, New Jersey ($9,881).
Thirteen states tax Social Security benefits, a matter of significant interest to retirees. Each of these states has its own approach to determining what share of benefits is subject to tax, though these provisions can be grouped together into a few broad categories. Today’s map illustrates these approaches.
In addition to the federal estate tax, with a top rate of 40 percent, some states levy an additional estate or inheritance tax. Twelve states and the District of Columbia impose estate taxes and six impose inheritance taxes. Maryland is the only state to impose both.
Hawaii and Washington State have the highest estate tax top rates in the nation at 20 percent. Eight states and the District of Columbia are next with a top rate of 16 percent. Massachusetts and Oregon have the lowest exemption levels at $1 million, and Connecticut has the highest exemption level at $7.1 million.
Of the six states with inheritance taxes, Nebraska has the highest top rate at 18 percent. Maryland imposes the lowest top rate at 10 percent. All six states exempt spouses, and some fully or partially exempt immediate relatives.
Property taxes represent a major source of revenue for states and the largest source of tax revenue for localities. In fiscal year 2018, the most recent data available, property taxes were such a significant source of local revenue that they accounted for 71.7 percent of local tax collections nationwide and 31.1 percent of total U.S. state and local tax collections, a greater proportion than any other source of tax revenue. In that same year, 25 states and the District of Columbia collected the greatest share of their combined state and local tax revenue from property taxes, with property taxes the largest share of local revenue in all but two states (Arkansas and Louisiana, both of which have high local sales taxes).
Sources of state revenue have come under closer scrutiny in light of the impact of the coronavirus pandemic, as different tax types have differing volatility and economic impact—although even beyond these unique circumstances, it is important for policymakers to understand the trade-offs associated with different sources of tax revenue. This week’s map looks at what percentage of each state’s state and local tax collections is attributable to the individual income tax.
State and localities rely heavily on the individual income tax, which accounted for 24.2 percent of total U.S. state and local tax collections in fiscal year 2018, the latest year for which data are available. The individual income tax ranks just above the general sales tax (23.3 percent) and behind property taxes (31.1 percent), taking its place as the second largest source of state and local revenue.