New York City Mayor Zohran Mamdani’s idea of raising property taxes by 9.5% as part of this year’s city budget solution has raised a lot of eyebrows across the nation.
Calling it a last resort, he said that if the state government won’t raise taxes on millionaires, the city might have to raise them on property instead to balance the city’s budget.
Property taxes long have been a political land mine because of their impact on household finances—including on a person’s federal income tax return, Forbes noted.
More properly called real estate taxes, property taxes are local taxes imposed on real estate based on its assessed value and are mostly used to fund schools and other local government services, including sanitation, police and fire departments, parks, and street repairs.
Citing the Tax Foundation, Forbes said that in fiscal year 2022, property taxes accounted for 27.4% of total state and local tax collections in the United States—more than any other category of tax revenue.
Local governments rely more heavily on them: property taxes accounted for 70.2% of local tax collections in fiscal year 2022, Forbes reported.
State and local governments prefer property taxes because they provide a relatively steady income stream. The tax base doesn’t move, and it rarely shrinks significantly, Forbes noted. Houses and commercial properties don’t relocate across state lines, and over time, property values tend to rise rather than fall.
If the tax base is relatively stable, why are property taxes so different in communities across the nation.
Forbes aid it comes down to two factors: property values and the tax rate.
Assessors Determine Value
Every city or county has an assessor’s office whose job is to determine what your property is worth—typically what it would sell for in an ordinary market transaction. For houses and condos, that usually means reviewing comparable sales, Forbes said. What have similar properties sold for recently?
For commercial buildings, assessors often rely on income data, including rents, expenses, and operating income.
Once a value is determined, the tax rate is applied, Forbes noted. In some places, the rate is expressed in mills—dollars per $1,000 of assessed value. In other place, it’s stated as a percentage. Either way, the math is the same: assessed value multiplied by the tax rate equals the tax bill, Forbes sai.
How often a property is reassessed can significantly affect your property tax bill, the publication said.
Some jurisdictions reassess every year, Forbes said.
Under Florida law, for example, once a property receives a homestead exemption, it is reassessed on Jan. 1 of each year to determine its current market value, subject to statutory limits on how much the assessed value can increase.
Other jurisdictions reassess every few years. Take Cook County, Illinois, for example. Properties there are reassessed once every three years under a rotating schedule.
Still others reassess at sale. Under California’s Proposition 13, a reassessment generally happens only when ownership changes (or when new construction occurs). Between ownership changes, annual increases are capped, Forbes reported.
In a rising market, that timing becomes especially important. From 2020 through 2025, U.S. house prices climbed roughly 55% nationwide, Forbes said, with many markets experiencing even larger gains.
Appreciation Raises Assessed Values
That appreciation increased homeowners’ equity, Forbes noted, but it also raised assessed values and, in many cases, tax bills.
If a taxpayer believes their property has been overvalued, they usually begin by contacting the assessor’s office to correct factual errors such as incorrect square footage, an extra bathroom, or a misclassification. If that doesn’t resolve the issue, Forbes said the homeowner can file a formal appeal with a local board of assessment review. In many jurisdictions, the homeowner also can take the case to court.
Appealing isn’t always as simple as filing paperwork.
In Texas, for example, Forbes noted that once the tax bill is issued, the homeowner generally must pay the undisputed portion—and often a large share of the disputed amount—before going to court.
In New Jersey, appeals are reviewed from scratch. Forbes said that sounds like a good thing until the homeowner realizes the door swings both ways. If the evidence shows the property was overvalued, they walk away with a lower tax bill. But if it shows the property was undervalued, the assessment can increase.
Since property values can disproportionately impact certain taxpayers, some states offer targeted savings, Forbes said.
For example, Pennsylvania offers a statewide income-based rebate for qualifying seniors, widows and widowers, and individuals with disabilities. The rebate isn’t a tax reduction applied to the bill itself but is paid after the fact, Forbes said.
Budget Surplus
Immediately after the pandemic, some states opted for property tax relief using budget surpluses. As revenue growth has slowed, holding onto or deepening those cuts becomes harder, Forbes said.
Wyoming lawmakers are considering expanding property tax relief while exploring alternatives such as higher sales taxes to replace the revenue. Projections show, however, that replacing property taxes entirely would leave a significant revenue gap.
In Florida, where there is no individual income tax, Republican Gov. Ron DeSantis has pushed to end property taxes, resulting in a slate of property tax reform proposals. Forbes said that many of the bills have drawn pushback from local leaders, since, without a replacement revenue stream, they may result in cuts to fire and emergency departments.
