How can taxes go up when property values don’t?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jul 16, 2021

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Sometimes property tax rates can go up, even if property value does not. The likelihood of rising property tax rates combined with falling or steady home values can vary depending on what state you live in. Some state legislatures have the power to allow a rise in property tax even when home values decline. In many other states, mathematical formulas are used to decide the relationship between property tax rates and home values.

How can property tax rates go up when home values don’t?

Property tax rates can increase because the individual taxing districts need to raise revenue to provide services. Local, voter-approved bonds and override levies may be responsible for rising property tax rates as well. If a district’s budget increases, while the assessed value of all property remains the same, the property tax rate will increase and individual property owners will pay higher taxes.

Sometimes, there is also a lag between an assessment of property value and a rise in property tax. Because revaluation of property value does not have to occur every year, it’s possible a home could lose a lot of value in a very short time, while property tax rates shoot up.

Can business values also affect property tax rates?

If business is bad for a local community, the area’s economy can suffer and affected business property value may go down. However, your property tax rates may still be higher, since taxing districts still need to pay for the same basic services.  Also, the taxing entity may need more money due to inflation, emergencies, and even lawsuits. A recession might also make businesses close, which can undermine an important source of tax revenue.

Can foreclosures affect property tax rates?

Some experts have estimated that a single foreclosed home in a neighborhood can lower neighborhood home values by three percent. Fortunately, many states allow lower estimated property tax rates when home values are falling. Arizona, as one example, has a law which prohibits the Limited Tax Value (the largest property tax allowed) to ever be higher than the market value of land and property.

With the economic downturn of 2008, many people lost significant property value and began using attorneys specializing in tax law to help keep them in their homes. City governments and tax authorities recognize that it benefits no one when lenders foreclose on a home with a below-market property value.

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