Property Tax 40.3% of State and Local Tax Receipts

From the third quarter of 2013 through the end of the second quarter of 2014, $493 billion in taxes were paid by property owners. This represents a nominal increase over the previous trailing four-quarters. Overall, state and local tax receipts from the third quarter of 2013 through the end of the second quarter of 2014 was $1,223 billion in all four of the major revenue sources; property tax, individual income tax, corporate income tax, and sales tax.

At 40.3%, property taxes represent the largest source of state and local tax receipts according to NAHB tabulations of the Census Bureau’s quarterly tax data. The share of individual income tax (27.7%) and sales tax (27.6%) were nearly identical at over a quarter of all state and local tax receipts. The smallest share of the four major sources was corporate income tax at 4.5% of state and local tax receipts.

Chart1

As state and local government property tax receipts increased in recent years, the share of property tax receipts from the four major sources fell from a high of 44.9% in the third quarter of 2010 to the current share of 40.3%. The average share for property taxes since 2000 is 39.2%.

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Although house prices experienced healthy increases in recent years, the changing share of property tax receipts from the four major sources is due predominantly to fluctuations in state and local individual income tax, corporate income tax, and sales tax receipts. Receipts from individual income tax, corporate income tax, and sales tax rise and fall along with the business cycle. Property tax receipts are more stable as state and local governments’ smooth collections through lagging assessments and annual adjustments.

* Data footnote: Census data for property tax collections include taxes paid for all real estate assets (as well as personal property), including owner-occupied homes, rental housing, commercial real estate, and agriculture. However, housing’s share is by far the largest when considering the stock of both owner-occupied and rental housing units.



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