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Where are property taxes the lowest? New report ranks every state
A few New England states have some of the highest rates in the country.
A report released this week shines a light on property tax rates around the country, ranking all 50 states and Washington, D.C. by how low each of their real estate property tax rates are.
The results of the report, released by personal-finance website WalletHub, paint an interesting portrait of New England that shows a divide between one half of the region’s states and the other.
Three of the New England states fell somewhere in the middle of the rankings. Massachusetts has the 33rd-lowest real estate property tax rate in the country, with an effective rate of 1.20%. Maine and Rhode Island have similar rates, coming in at numbers 36 and 39 on the rankings, respectively.
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On the flip side, Connecticut was ranked 49th on the list with an effective real estate tax rate of 2.15%. Only Illinois and New Jersey have higher rates, according to the report. New Hampshire was ranked 48th, and Vermont was ranked 47th.
Hawaii was ranked number one, with an effective real estate tax rate of just 0.29%. Alabama was second with a rate of 0.41%, and Colorado third with a rate of 0.51%.
As part of the report, WalletHub asked a series of questions to tax experts from around the country. Timothy M. Harris, a visiting assistant professor at University of Maine School of Law, said that property taxes can affect people disproportionately.
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“Unfortunately, property taxes can operate regressively when two individuals have disparate incomes but live in similarly valued homes. This unfairness particularly hits retirees who have lived in their houses for decades. Property values frequently increase at a higher rate than personal incomes, leading to high tax burdens on families with fixed incomes,” Harris said in the report.
WalletHub also tracked how property real estate tax rates have changed state-by-state since 2010. Their data shows rates in Massachusetts and Maine remaining relatively unchanged, while rates increased in Vermont, New Hampshire, and Connecticut.
Source: WalletHub
The report is based on data from the U.S. Census Bureau. To determine real estate property tax rates, WalletHub divided the median real estate tax payment by the median home price in each state. The resulting rates were then used to obtain dollar amounts paid as real estate tax on a house worth $244,900, the median value for a home in the U.S. as of 2021.
Paul K. Chaney, a professor at Vanderbilt University’s Owen Graduate School of Management, expanded on the importance of property taxes for local governments and why they are relied on so heavily.
“For most local governments, property taxes will be the top revenue generator. Also, increases in property taxes are probably easier to estimate than other forms of taxes (such as sales taxes). In this case, a property tax can reduce the uncertainty of revenue generation,” Chaney said in the report.
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As part of the report, WalletHub also tracked how political affiliations impact property taxes. Red states tend to impose lower real estate property taxes than blue states. States were designated as red or blue based on how their residents voted in the 2020 Presidential Election. On the list of states ranked by their real estate property tax rates, red states had an average rank of 22.8. Blue states had an average rank of 29.08.
These tax rates are important because they give insight into when and why people move, Alex Combs, a professor at University of Georgia, said in the report.
“Differences in property taxes affect residential mobility patterns, so it seems the average person does consider property taxes,” Combs said. “After all, people are sensitive to price, and the property tax is a visible cost of homeownership that funds generally desirable government services like education and public safety. If they have the opportunity, people are going to seek the biggest benefit for their property tax buck.”
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