Concept review: tax rate calculation and mills

With a budget and the tax digest calculated, the tax rate is calculated based on the ratio of the fiscal budget less anticipated fee collection, and the tax digest less exemption.

               Budget amount for fiscal year less anticipated fee collection

Tax rate =                         Tax digest less total exemptions

For example, a county has a funding need of $5,000,000 for the up coming year and 20% of this amount is expected to be met with fees.  The tax digest in the county is $250,000,000 with a total amount of exemptions of $50,000,000.  What is the tax rate?

                             $5,000,000 - $1,000,000

Tax rate =     $250,000,000 - $50,000,0000  = 0.020

The tax rate for the county in the example above is .02 or 2.0%.  However, property tax rates are commonly quoted in mills rather than as a percent.  A millage rate or mill means 1 per 1,000 or 1/1000.  Don’t let this confuse you.  A millage rate is very similar to a percent meaning 1 per 100 or 1/100.  A mill just has an extra decimal place (.001 versus .01 with percentages). 

To convert a decimal format to a percent, move the decimal place over two spaces to the right and add a % sign at the end.  Above, .02 was written as 2.0% and this did not upset you. 

How would a tax rate of .02 be expressed in mills? 

Move the decimal place over three spaces to the right and add ‘mills.’  The answer is 20 mills!  20 mills are synonymous with 2% and .02. 

Although we might prefer percentages, many tax assessors prefer to use mills.  Since we need to know the language of tax assessors, we need to understand the millage rate system.