The Tax Foundation calculates that Washington overall ranks No. 27 on property taxes.
Today’s map shows states’ rankings on the property tax component of the 2020 State Business Tax Climate Index. The Index’s property tax component evaluates state and local taxes on real and personal property, net worth, and asset transfers. The property tax component accounts for 16.6 percent of each state’s overall Index score.
Property taxes matter to businesses for several reasons. First, businesses own a significant amount of real property, and tax rates on commercial property are often higher than the rates on comparable residential property. Many states and localities also levy taxes not only on the land and buildings a business owns but also on tangible property, such as machinery, equipment, and office furniture, as well as intangible property like patents and trademarks. Across the nation, property taxes impose one of the most substantial state and local tax burdens most businesses face. In fiscal year 2018, taxes on real, personal, and utility property accounted for 38 percent of all taxes paid by businesses to state and local governments, according to the Council on State Taxation.
This map and associated commentary draw on the 2020 State Business Tax Climate Index, which we discussed here. Washington ranked No. 19 in the 2020 SBTCI, uncharged from the prior year.
The criteria for evaluating property taxes are described in the SBTC”I methodology section.
The property tax portion of the Index is composed of two equally weighted subindices devoted to measuring the economic impact
of both rates and bases. The rate subindex consists of property tax collections (measured both per capita and as a percentage of personal income) and capital stock taxes. The base portion consists of dummy variables detailing whether each state levies wealth taxes such as inheritance, estate, gift, inventory, intangible property, and other similar taxes.
The Tax Foundation dings Washington for levying a tangible personal property tax, a real estate transfer tax, and a transfer tax.