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.
How It Works
Property taxes are calculated by multiplying the assessed value of a property by the tax rate (mill rate). Cities set the rate, while county assessors typically determine property values. Property taxes are considered a stable revenue source because property values are less volatile than sales or income tax revenue. However, they are regressive — consuming a larger percentage of income for lower-income homeowners. Cities in states without income taxes (like Texas and Tennessee) are especially dependent on property taxes.
Related Terms
- Mill Rate (Millage Rate) — The property tax rate expressed as dollars per $1,000 of assessed property value. One mill equals $1 of tax per $1,000 of assessed value.
- 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.
- Revenue Diversity — The degree to which a city's revenue comes from multiple sources (property tax, sales tax, fees, grants) rather than being concentrated in a single stream.
About This Definition
This definition is part of the CitySpend Municipal Finance Glossary — 59 terms explaining how city governments fund and manage public services. All definitions are written in plain language for taxpayers, journalists, students, and municipal bond investors.