How are rates determined?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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The operations of a local taxing unit are supported through the dollars raised by property taxes. Basically the unit calculates the tax in one of two forms:

(1) it divides the figure for estimated expenditures by the taxable or assessed value of all property in its area. The result is the tax rate and may be expressed using mills or percentages or a dollar amount ($1 per $100).

(2) It estimates the amount of revenue available from property tax levied at a rate specified in an ordinance or statute. Increases or decreases in the property’s taxable or assessed value directly affect the unit’s budget.

Rate limitations are common, imposed by the state’s constitution or by statute. In a large number of states, a maximum ceiling rate is set for each class of government (e.g., school, city, county, special district).

Because homes are located in different tax districts (primarily schools and cities) total tax rates vary from one neighborhood to another. Since more than one taxing authority is calculating a tax rate for the property, many jurisdictions add all the rates together, resulting in a single tax levy called a consolidated, overall, or composite levy. For example, your property tax bill would show not only a county rate, but also a school district rate, any special district tax rates (e.g., hospital, drainage, lighting).

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