Which city has the highest property tax on a $250,000 house?

To answer this question, real estate appraiser M. Lance Coyle, MAI of the North Texas Chapter of the Appraisal Institute conducted an interesting study. He obtained the total property tax rates and assessment ratios from 11 major metropolitan areas and calculated the property for each city based on a $250,000 ad valorem value.

The results might surprise you. Please see the table below. The effective tax rate is the annual tax divided by $250,000.

City Annual Tax Effective Tax Rate

Atlanta, Georgia $944.00 0.38%

Denver, Colorado $1332.27 0.53%

New York City, New York $2417.70 0.97%

Chicago, Illinois $2681.60 1.07%

Oklahoma City, Oklahoma $2750.00 1.10%

Little Rock, Arkansas $3165.00 1.27%

Albuquerque, New Mexico $3240.00 1.30%

St. Louis, Missouri $3320.39 1.33%

Miami, Florida $3699.66 1.48%

Los Angeles, California $3776.55 1.51%

Dallas, Texas $6139.44 2.46%

(Source: The Professional Appraiser published by the North Texas Chapter of the Appraisal Institute, volume XXIV, number 1, January 2008, pages 3-4.)

Interesting findings. An Atlanta homeowner pays only .38% per year property tax on a $250,000 house value and Dallas homeowner pays a hefty 2.46% on the same value.

But don’t cities like Atlanta, Denver, New York City, and Chicago have reputations for a higher than average costs of living and taxes burdens. Conversely, Dallas, Texas is generally known for a low cost of living (especially concerning housing) and low taxes. This table appears to demonstrate the opposite of most expectations.

Here is the deal. If we look at the total tax burden, Texas residents do have a relatively low tax burden, because Texas does not have a state income tax. The Texas tax burden is concentrated on sale taxes and perhaps the highest property taxes in the country.

Also, consider what you can purchase for $250,000 in New York City or Chicago versus Dallas. In New York, $250,000 might get you two bedrooms in a rough neighborhood. In contrast, $250,000 in Dallas will buy 4 or 5 bedrooms in a nice part of town.

An alternative approach to this study would be to calculate the effective tax rate on a similar type (in terms of physical features and location attributes) of property in the eleven cities. This approach would theoretically provide an apples-to-apples comparison, but the difficulty would be in finding ‘similar’ properties in each city. We know all properties are different in terms of location, location, location as well as dozens of other aspects.

This study leads to another question. Are property values in Dallas relatively inexpensive because of the high property tax or does the high property tax force housing cost to be relatively inexpensive?

Not expecting a clear answer to this question. After all, we never figured out that chicken and egg deal either.