Property Tax Revenues See Largest Increase Since 2009

NAHB analysis of the Census Bureau’s quarterly state and local tax data shows that $286 billion in taxes were paid by property owners in the fourth quarter of 2022 (not seasonally adjusted).^[1] State and local governments collected $714 billion in property taxes in 2022, $46 billion more than 2021. The 6.9% annual increase is the largest since property tax receipts climbed 9.3% in 2009.

Property taxes accounted for 35.0% of state and local tax receipts in the four quarters ending Q4 2022, a 0.8 percentage point increase over the prior quarter but down from 36.1% one year prior. In terms of the share of total receipts, property taxes were followed by individual income taxes (30.0%), sales taxes (27.6%), and corporate taxes (7.5%).

The ratio of property tax revenue to total tax revenue from the four sources has been below its pre-housing boom average of 37% for the past four quarters. Quarterly corporate income tax revenues increased as a share of the total, accounting for 6.9% of state and local tax receipts (NSA), up from 6.2%.

Year-over-year growth of four-quarter property tax revenue was the first such increase since the third quarter of 2021. Four-quarter corporate income tax, individual income tax, and sales tax revenue increased 34.2%, 8.6%, and 11.5%, respectively, year-over-year.

The share of property tax receipts among the four major tax revenue sources naturally changes with fluctuations in non-property tax collections. Non-property tax receipts including individual income, corporate income, and sales tax revenues, by nature, are much more sensitive to fluctuations in the business cycle and the accompanying changes in consumer spending (affecting sales tax revenues) and job availability (affecting aggregate income). In contrast, property tax collections have proven relatively stable, reflecting the long-run stability of tangible property values as well as the effects of lagging assessments and annual adjustments.

[1] Census data for property tax collections include taxes paid for all real estate assets (as well as personal property), including owner-occupied homes, rental housing, commercial real estate, and agriculture. Owner-occupied and rental housing units combine to make housing’s share the largest among these subgroups.

Source: eyeonhousing.org