Property Tax (Millage)

Most library taxes are property taxes.  Real estate is assessed with a hypothetical market value that is supposed to represent the sales value of the property.  Theoretically, a home that sells for $100,000 should be assessed for property tax purposes at $100,000.  However, since there is no way to absolutely assess the value of a property except by selling it!  Property values can vary more or less from the "real" value.  Much depends on the assessor and the assessment policy of the jurisdiction and the state.

Keeping your own property's rate low while new homes are being built nearby keeps your tax low and transfers the cost to other, newer homes and properties.  Some states (WI among them) force local assessors to re-evaluate properties periodically if a sample of sales of existing homes differs by a fixed percent from the assessed value.

The term mill rate or millage rate comes from the Latin for thousand.  It means a tax rate per $1,000 of assessed value of the property.  A tax assessor sets the value of your home at $100,000 and we express the tax as a rate per $1,000 of value (mill rate).  A mill rate of $1.00 per $100,000 will generate a tax of $100 on a $100,000 home, $200 on a $200,000 home, $300 on a $300,000 home and so forth. 

If a taxing district has aggregate value of $100,000,000 and there is a need for $200,000 we call that a need for a $200,000 tax or tax levy.  The tax rate in the district is expressed as a mill rate or millage rate on all taxable property -- a $2.00 mill rate ($200,000 divided by the aggregate value of the district of $100,000,000 = $2.00 per thousand of property value).

Politicians like mill rate comparisons because the value of real estate is nearly constantly rising because of inflation and new construction.  The rate per $1,000 can remain stable or even decline - leading to headlines about declining tax rates.  This is true even though the total tax levy amount is increasing. If the total tax base, new and existing properties, grows 10% then the same mill rate generates 10% more money.  If the base grow 20% and the tax levy goes up only 10% (still higher than the rate of current inflation, of course) the mill rate will decline, leading to those positive headlines.

Property tax levies are probably the most stable and least volatile form of taxation, a reason for libraries to favor them, of course.

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October 2008

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