United Kingdom
There is currently no ad valorem tax on residential property. Two former systems were dropped because of their extreme unpopularity. They were
-
Schedule A income tax, a central government tax that was levied on the imputed rent, that is the rent that owner-occupiers of land would have been receiving from a tenant had they not been living in the houses they owned. However, actual (as opposed to imputed) rent is still subject to income tax under Schedule A;
-
Rates, a local government tax that was levied in proportion to the assessed value of property. This was replaced under the Thatcher government by a poll tax, which proved even more unpopular than the rates, and was replaced by a mixed council tax which combines elements of property tax and a poll tax. Rates are still (2006) levied on business property, though some classes of business are exempt.
United States
In the United States, property tax on real estate is usually assessed by local government, at the municipal or county level. A very important benefit of a tax on property over a tax on income is that the revenue always equals the tax levy, unlike income or sales taxes, which can result in shortfalls producing deficits. The property tax always produces the required revenue for municipalities' tax levies. On the other hand property taxes can have a negative impact on individuals with fixed incomes such as the elderly and those who have lost their jobs. Gentrification in low income areas of a city can drive property taxes to the point where long time residents of an area are forced to leave.
The assessment is made up of two components -- the improvement or building value and the land or site value. In some states, personal property is also taxed. A tax assessor is a public official who determines the value of real property for the purpose of apportioning the tax levy. An appraiser may work for government or private industry and may determine the value of real property for any purpose.
Tax assessor offices maintain inventory information about improvements to real estate. They also create and maintain tax maps. This is accomplished with the help of surveyors. On tax maps, individual properties are shown and given unique parcel identifiers. The tax maps help to ensure that no properties are omitted from the tax rolls and that no properties are taxed more than once. Real property taxes are usually collected by an official other than the assessor. Duplicate examples of a proposed alternate to ad valorum assessments is provided at the following sites as sponsored by the The Henry George Foundation. Maryland, King County, Washington, Indiana, New Jersey, New York. In fact many localities have gone online.
The assessment of an individual piece of real estate may be according to one or more of the normally accepted methods of valuation (i.e. income approach, market value or replacement cost). Assessments may be given at 100 percent of value or at some lesser percentage. In most if not all assessment jurisdictions, the determination of value made by the assessor is subject to some sort of administrative or judicial review, if the appeal is instituted by the property owner.
Ad Valorem (of value) property taxes are based on fair market property values of individual estates. A local tax assessor then applies an established assessment rate to the fair market value. By multiplying the tax rate x the assessed value of the property, a tax due is calculated. These taxes are collected by municipalities such as cities, counties, and districts in many locations in the United States. They fund municipal budgets for school systems, sewers, parks, libraries, fire stations, hospitals, etc.
After determining a budget at the municipal level, a legislative appropriation determines how the monies will be collected and distributed. After that, a tax authority levies the tax. An appeal is permitted. Equalization is then considered by a board of equalizers to assure fair treatment. Then a tax rate is determined by dividing the municipal budget by the assessment role of that municipality. Your tax rate x the assessed value of your property determines the tax you owe.
Some jurisdictions have both ad valorem and non-ad valorem property taxes, the latter representing a fixed charge (regardless of value) for items such as street lighting and storm sewer control.
In the US, another form of property tax is the personal property tax, which can target
-
automobiles, boats, aircraft and other vehicles;
-
other durable goods (though typically household goods and personal effects are exempt);
-
inventory;
-
intangible assets such as stocks and bonds.
In some states, it is permissible to separate the real estate tax, into two separate taxes—one the land value and one on the building value. (See Land Value Taxation.)
Personal property taxes can be assessed at almost any level of government, though they are perhaps most commonly assessed by states.