A recent study has unveiled a significant disparity in property tax rates across the United States, with tax bills varying by nearly $8,000 for homes of the same value, depending on their location. The analysis conducted by the Tax Foundation, based on the most recent data from the Census Bureau, sheds light on these disparities.
New Jersey emerges as the state with the highest effective tax rate, standing at 2.23%—the highest among all 50 states and the District of Columbia. In stark contrast, Hawaii boasts the lowest effective tax rate, at a mere 0.32%.
|10 LOWEST||10 HIGHEST|
To put this into perspective, for a home valued at the U.S. median of $416,100, New Jersey homeowners would face a substantial property tax bill of $9,279, whereas those residing in Hawaii would encounter a significantly lighter burden, with a tax bill of just $1,332.
The median effective property tax rate across all states and the District of Columbia stands at 0.91%, but only New Jersey and Illinois have property tax rates exceeding 2%.
In New Jersey, this high tax rate can be attributed to a strong emphasis on local control of public services, particularly in education. These educational costs, among the highest in the nation, are predominantly funded through property taxes.
Similarly, Illinois has an abundance of local government units, surpassing all other states. These entities are primarily financed through property taxes, with a substantial portion allocated to education and state employee pension obligations.
Conversely, Hawaii operates with a more centralized government structure at the state level and relies less on property taxes, favoring tourism as a revenue source for government services. Consequently, property taxes in Hawaii are the lowest in the country.
However, it’s worth noting that Hawaii remains the most expensive state to purchase a home, as revealed in a recent study by LendingTree.
Interestingly, states known for their relatively low overall tax burden, such as New Hampshire and Texas, find themselves among the states with the highest effective property tax rates.
These states, devoid of income taxes, depend more heavily on property taxes to fund a substantial portion of government services.