Tax Foundation: Washington ranks 27th in property tax burden on owner-occupied housing.

Property taxes on owner-occupied housing in Washington represent less than 1% of the home’s assessed value, according to a new Tax Foundation report. That ranks the state 27th in the nation (1 would be the highest burden).

The TF calculation is one we’re not used to seeing; typically, the property tax burden is expressed as a share of income or on a per capita basis. But it’s a good measure of how property taxes are experienced by homeowners. 

TF analyst Janelle Cammenga explains the methodology:

Today’s map takes another look at property taxes, this time focusing on states’ effective tax rates on owner-occupied housing. This is the average amount of residential property taxes actually paid, expressed as a percentage of home value.

Because property taxes are tied to housing values, it makes sense that the actual dollar amounts of property taxes tend to be higher in places with higher housing prices. This map takes housing value into account in order to give a broader perspective for property tax comparison.

As she points out, states tax property in a variety of different ways: some states differentiate among property classes (industrial, commercial, residential), some have different assessment practices for valuing property, and so on. 

Washington’s system is among the nation’s best, in that it treats all property uniformly and assesses it a 100% of actual value. The Senate Ways and Means Committee has explains in the 2020 edition of A Legislative Guide to Washington’s Tax Structure. 

Perhaps the most important principle of property taxation in our state is the uniformity of taxation. In the 1853 Organic Act establishing the government of the Washington Territory, the U.S. Congress imposed a strong requirement for uniformity in taxation in order to prevent the territory’s residents from imposing a disproportionate share of taxes on nonresidents. Uniformity of taxation continued as a fundamental principle in the state Constitution adopted in 1889.

The state Constitution includes a uniformity clause, which provides that “taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax…. All real estate shall constitute one class.” This means that taxes must be the same on real property of the same market value. Uniformity requires both an equal rate of tax and equality in valuing the property taxed. Many other states have differential tax rates or different value standards that depend upon the separate classifications of property. Such a system would not be constitutional in Washington.

Beyond the principle of uniformity, the Washington property tax system as we know it today really took shape in the early 1970s. In 1972, Washington voters amended the Constitution to limit the annual amount of property taxes that may be imposed on an individual parcel of property to 1 percent of its true and fair value. By law, tax rates are stated in terms of dollars per $1,000 of value. Therefore, the 1 percent limit is the same as $10 per $1,000. Under the constitutional amendment, the 1 percent limit ($10 limit) may be exceeded only with the approval of 60 percent of the district’s voters, with the exception of school districts, which may pass a levy with a simple majority vote.

Washington is also unusual in that state government collects a property tax; in many states, the tax is reserved for local government. The state property tax played a significant role in the Legislature’s resolution of the McCleary school funding case.

The Tax Foundation analysis highlights the wide variation in effective property tax rates.

New Jersey has the highest effective rate on owner-occupied property at 2.21 percent, followed closely by Illinois (2.05 percent) and New Hampshire (2.03 percent). Hawaii sits on the other end of the spectrum with the lowest effective rate of 0.30 percent. The state is followed closely by Alabama (0.40 percent), Louisiana (0.52 percent), and Wyoming (0.55 percent).

A useful comparative analysis.