Earlier this month, the non-profit Tax Foundation – a Washington, D.C.-based think tank – identified where households pay the most in property taxes using data the U.S. Census Bureau collects as part of the ever-helpful American Community Survey 5-year data that was released in 2021, predating the pandemic’s house-price bump.
The Tax Foundation found the national property tax bill average was $1,682. New Jersey had the highest tax rate at 2.23% of owner-occupied value with total property taxes paid divided by the home’s value. Next-door neighbor Illinois came in No. 2 at 2.08%.
Last place? Hawaii – thanks to tourism spending – at 0.32%.
Closer to home, Indiana’s tax rate was 0.84%, putting our state at 30th place.
Hoosier lawmakers have taken a remarkable interest in property taxes over the past 20 years with many revisions, adjustments and changes in how taxes and assessments are calculated.
It started with the shift to a market-based system in the late 1990s to early 2000s, then to Gov. Mitch Daniels’ 1-2-3 tax caps now enshrined in the Indiana Constitution and repeated discussions at the Statehouse about supplemental homestead credits and other tax offsets for those who own real property as their primary residence.
Property taxes – unlike sales tax or even income tax – are presented as a bill to be paid on a certain date, not as an incidental expense when checking out or a paycheck deduction. Instead, property owners see the full bill upfront.
The Tax Foundation published the data for all counties and associated jurisdictions in the United States, so with a little Excel formatting, it was easy to sort Indiana’s tax data by county.
The highest median property tax bill? Hamilton County – north of Indianapolis and home to Carmel, Fishers and Noblesville – at $2,887.
The lowest? Northwest Indiana’s Pulaski County with the county seat of Winamac at $503. For Allen County, it was $1,305 at the 16th spot.
As measured by the median tax bill for owner-occupied homes, the highest taxes tended to be in the Indianapolis doughnut counties, the Chicago suburbs and other large metro counties. The lowest taxes were in smaller, less urbanized and more rural locations including Grant, Wabash and Parke counties.
Indiana is 20 years into its low-tax experiment as a driver of growth and prosperity. So this county property tax summary provides a nice table to compare taxes to population growth, especially since Indiana’s property taxes are based on market values.
If the notion that low taxes create growth holds true, the counties with the lowest taxes should see the greatest growth, right? Wrong.
Using the change between the 2010 census and the 2020 census, 43 Hoosier counties gained population and 49 lost residents. Comparing growth to taxes, the counties with the 12 highest tax bills saw population growth.
It’s St. Joseph County that breaks the streak, but then it picks up again for another nine counties of high taxes – all breaking the $1,000 mark before hitting another county with population loss.
In sum, of the 24 counties with the highest tax bills, only two lost population over a decade, with a total population gain of nearly 320,000 residents.
Shifting to the lowest-tax counties, the 12 cheapest median tax bill counties all lost population, totaling almost 12,000 fewer residents over a decade’s time.
If concern about taxes alone drove people’s decisions about where to live, places such as Miami, Clay and Fulton counties should have grown since their median tax bill was less than $700, and taxes breaking the $2,000 mark should have seen a departure of households averse to taxes. Yet it’s exactly the opposite.
The analysis of Indiana’s tax bills compared to population change demonstrates that property owners with geographic mobility choose communities with a high cost of living and an expensive tax bill.
If a locale’s strategy for growth rests on selling its low cost of living and cheap taxes, the market data from the past decade is telling them those who want to move are willing to pay for a premium product that these smaller communities simply do not offer.
A rural lifestyle appeals to a certain audience, but the data here indicates the appeal is limited. Just about everything from the Census Bureau, tax data and population change does a great job of telling us what happened here, but nothing about why.
Are those relocating to high-tax jurisdictions looking for prestige? Housing only available in select locations? Job opportunities to meet their professional training and credentials? Schools with high test scores?
It’s hard to say, but the market is clearly picking winners and losers. And low property taxes aren’t a winner when it comes to population growth.
