America's Property Tax Advisor

Best and Worst States for Property Tax

BY VICKI ROBBINS, DALLAS, JANUARY 2021

The Tax Foundation has released its annual Business Tax Climate Index. The report’s property tax component evaluates state and local taxes and real and personal property, net worth, and asset transfers. The property tax component accounts for 14.8% of each state’s overall index score.

 

A Substantial Tax Burden

 

Property taxes matter to businesses for several reasons. First, businesses own a significant amount of real property, and tax rates on commercial property are often higher than the rates on comparable residential property.

 

Many states and localities also levy taxes not only on the land and buildings a business owns but also on tangible property, such as machinery, equipment, and office furniture, as well as intangible property like patents and trademarks.

 

Across the nation, property taxes impose one of the most substantial state and local tax burdens most businesses face. Although taxes on real property tend to be unpopular with the public, a well-structured real property tax generally conforms to the benefit principle (the idea in public finance that taxes paid should relate to benefits received) and is more transparent than most other taxes.

 

Winners and Losers

 

The states that score the best on property tax are New Mexico, Indiana, Idaho, Delaware, Nevada, and Ohio. These states generally have low rates of property tax, whether measured per capita or as a percentage of income. They also avoid distortionary taxes like estate, inheritance, gift, and other wealth taxes.

 

States that score poorly on the property tax component are Connecticut, Vermont, Illinois, New Hampshire, New Jersey, and New York. These states generally have high property tax rates and levy several wealth-based taxes.

 

Property Tax Component of the 2021 State Business Tax Climate Index

A rank of 1 is best, 50 is worst.

1.

 

New Mexico

2.

 

Indiana

3.

 

Idaho

4.

 

Delaware

5.

 

Nevada

6.

 

Ohio

7.

 

Utah

8.

 

Missouri

9.

 

Hawaii

10.

 

West Virginia

 

 

 

50.

 

Connecticut

49.

 

Vermont

48.

 

Illinois

47.

 

New Hampshire

46.

 

New Jersey

45.

 

New York

44.

 

Massachusetts

43.

 

Maryland

42.

 

Rhode Island

41.

 

Nebraska

40.

 

Maine

 
Source: Tax Foundation.