US property tax disparities across states leave homeowners feeling betrayed

Interestingly, states typically considered 'low-tax,' such as New Hampshire and Texas, have some of the highest effective property tax rates

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An image of a For Sale sign displayed in Falls Church, VA. — AFP/Files
An image of a 'For Sale' sign displayed in Falls Church, VA. — AFP/Files

A recent study highlights significant disparities in property taxes across the United States, with variations of up to $8,000 for homes of the same value depending on their location.

New Jersey stands out with the highest effective tax rate of 2.23% among all 50 states and the District of Columbia, according to an analysis by the Tax Foundation based on the most recent Census Bureau data. 

On the other end of the spectrum, Hawaii boasts the lowest tax rate at just 0.32%.

For a home valued at the US median of $416,100, New Jersey homeowners face an annual property tax bill of $9,279, while their counterparts in Hawaii pay only $1,332 for the same property. 

The median effective property tax rate across all states and the District of Columbia is 0.91%, with only New Jersey and Illinois exceeding the 2% mark.

In New Jersey, there's a strong emphasis on local control of public services, especially in education, which contributes to some of the nation's highest education costs, primarily funded through property taxes.

Illinois, on the other hand, boasts the highest number of local government units compared to any other state. 

These entities rely heavily on property taxes, with a substantial portion allocated to education and state employee pension obligations.

In contrast, Hawaii maintains a more centralised government structure at the state level and relies on tourism revenue more than property taxes to fund public services. 

Consequently, it boasts the lowest property tax rates in the country.

However, despite its low property taxes, Hawaii remains the most expensive state to purchase a home, as per a recent study by LendingTree.

Interestingly, states typically considered 'low-tax,' such as New Hampshire and Texas, have some of the highest effective property tax rates. 

Since neither state imposes income taxes, they heavily depend on property taxes to finance a significant portion of government services.

This study calculates the effective property tax rate as the average taxes paid relative to a home's value, specifically for owner-occupied residences. 

The rate was determined using 2021 US Census data, the most recent available information.