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Property tax

Property tax is an ad valorem tax that an owner of real estate or other property pays on the value of the target of the tax. The taxing authority performs or requires an appraisal of the value of the property, and tax is assessed in proportion to that value. Forms of property tax used vary between countries. Examples are:

United Kingdom

There is currently no ad valorem tax on residential property. Two former systems were dropped because of their extreme unpopularity. They were

• Schedule A income tax, a central government tax that was levied on the imputed rent, that is the rent that owner-occupiers of land would have been receiving from a tenant had they not been living in the houses they owned. However, actual (as opposed to imputed) rent is still subject to income tax under Schedule A;
• Rates, a local government tax that was levied in proportion to the assessed value of property. This was replaced under the Thatcher government by a poll tax, which proved even more unpopular than the rates, and was replaced by a mixed council tax which combines elements of property tax and a poll tax. The poll tax debacle was one of the factors that led eventually to Margaret Thatcher losing the office of Prime Minister. Rates are still (2003) levied on business property, though some classes of business are exempt.

United States

In the United States, property tax on real estate is usually assessed by local government, at the municipal or county level. Tax assessor offices are responsible for plotting and mapping land ownership for collection purposes. This is accomplished with the help of surveyors.

Rising real estate property taxes were a cause of taxpayer revolt in the west; see California Proposition 13 (1978) and Oregon Ballot Measure 5 (1990) for more details.

In the US, another form of property tax is the personal property tax, which can target

• automobiles,
• other durable goods (though typically household goods and personal effects are almost always exempt), and
• intangible assets such as stocks and bonds.

Personal property tax can be assessed at almost any level of government, though they are perhaps most commonly assessed by states.

Real estate taxes in many locations in the United States are used to fund school systems. Thus, poor areas perforce have disadvantaged school systems. The system of real estate taxes has been sharply criticized as being archaic for this and other reasons.

See also: Land Value Tax, California Proposition 13 (1978).