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1 Joseph Henchman, State and Local Property Taxes Target Commercial and Industrial Property 1 (2012)

handle is hein.taxfoundation/ffdecxz0001 and id is 1 raw text is: November21 2012                                                                       a      c      t
No. 342
State and Local Property Taxes Target
Commercial and Industrial Property
By
Joseph Henchman
In Fiscal Year 2010, state and local governments collected $441.6 billion in property taxes, comprising 23.5
percent of state and local own-source revenue.' The tax exists in all fifty states, and while the property tax has
strengths (it is familiar, stable, visible, easy to administer, allows local control, and is somewhat connected to
government services received), it remains a politically unpopular tax.2 In 2009, 55 percent of poll
respondents characterized the property tax as not fair or not at all fair; only 5 percent called it very
fair.'3 Efforts to restrain property taxes are the most successful of tax limitation efforts.
Why is the property tax so disliked? One cynical answer is that the tax's visibility and high level of collections
by themselves make it reviled.4 Others point to frequent complaints about administration, such as
assessments at odds with market values or tax amounts being unpredictable year-to-year. Political responses
to property tax outrage include homestead exemptions, separate property classifications, economic
development abatements, circuit breakers, and deferrals.
One result of this outrage has been differing tax rates based on use, often by raising taxes on commercial and
industrial property while reducing taxes on residential property. The Minnesota Taxpayers Association and
the Lincoln Institute of Land Policy compared property tax treatment of homesteads (residential property)
with that of commercial property in representative cities in each state for Fiscal Year 2010 (see Table 1). They
found that commercial property faces higher tax rates than residential property in 39 states.5 Tax collections
were equal in 9 states (Connecticut, New Hampshire, New Jersey, North Carolina, Oregon, Washington,
and Wyoming), while residential property was actually taxed at a higher rate in four states (Delaware,
' See U.S. Census Bureau, State and Local Government Finances FY2010. Own-source revenue excludes intergovernmental funds
(federal transfers to state governments and state transfers to local governments).
2 See, e.g., David Brunori, LOCAL TAX POLICY: A FEDERALIST PERSPECTIVE 46-54 (2007).
3 See Matt Moon, How Do Americans FeelAbout Taxes Today? Tax Foundation s 2009 Survey of U.S. Attitudes on Taxes,
Government Spending, and Wealth Distribution, TAX FOUNDATION SPECIAL REPORT No. 166 (2009),
1it-p://taxfoundation org/irticle/ow-do-americans-feel-abouit-taxes-todav-tax-fo undatoiis-2009-su vey-us-ati-Udes-taxes-
4 See, e.g., Brunori, supra note 2 at 56-57.
5 See Minnesota Taxpayers Association & Lincoln Institute of Land Policy, 50-State Property Tax Comparison Study (2011) at 14,
http:/wvvww .incoinunst edu/subc snt.     -fcalurs-uroocrt)-
tdax/uplod/!s)urcesiConvenm1gs/documrusi/MTAdoc NewCover.pdf.

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