Mill Rate (Millage Rate)

How It Works

The mill rate (also called millage rate or tax rate) is the mechanical conversion factor between assessed property value and the tax bill. One mill equals one-thousandth of a dollar, so a mill rate of 20 applied to a property assessed at $200,000 produces a tax bill of $4,000 (20 mills × $200,000 ÷ 1,000). Mill rates vary enormously across U.S. cities, from under 5 effective mills in low-tax Sun Belt cities like Honolulu and Cheyenne, to over 50 effective mills in older Northeastern industrial cities such as Bridgeport, Connecticut and Detroit pre-bankruptcy. The total mill rate applied to a property typically combines levies from multiple overlapping taxing jurisdictions: the city, the county, the school district, and special districts for fire, library, water, mosquito control, or transit. The Lincoln Institute of Land Policy publishes an annual 50-state property tax comparison showing that effective rates (tax paid divided by market value) are a better comparison than nominal mill rates, because assessment ratios vary by state. Texas cities average effective rates near 2.0% of market value, while Hawaii averages near 0.3%, a nearly 7x difference. State-imposed levy limits and assessment caps constrain how much mill rates can grow, which affects a city's revenue elasticity during inflationary periods and feeds into both the revenue diversity (10%) and trend direction (10%) factors of the CitySpend Fiscal Health Score.

Related Terms

• Property Tax, A tax levied on real estate (land and buildings) based on assessed value. Property taxes are the single largest revenue source for most U.S. city governments.
• Assessed Value, The value assigned to a property by a government assessor for the purpose of calculating property taxes, which may differ from market value.
• Tax Levy, The total amount of property tax revenue a city authorizes to collect in a given year, calculated by applying the mill rate to the total assessed value of all taxable property.