What does a Zero Percent Tax Increase do for us?
I'm most proud to have served on a council that, from 2018-2021, delivered the lowest property tax rises in over twenty years. All of those increases were also below the corresponding annual rate of price inflation. And In 2021 we were able to hold the increase in property tax rate to zero percent; that's no increase at all.
Beaumont property tax rises 2015-2021. Source: Beaumont Consolidated Budget 2021
But, I'm often asked, what does this actually mean for the typical tax paying home owner in Beaumont? Many people experience a rise or a fall in the annual amount of tax they pay even with a zero percent tax increase. So why isn't everybody's property tax bill the same in 2021 as it was in 2020?
To answer this we have to consider how property tax bills are actually calculated for the entire municipality. For simplicity and clarity, I have used approximate and rounded numbers. Suppose that in 2020 Beaumont had 5,000 residential tax payers and that the average value of a home here is $400,000. The total value of all the residential property in Beaumont is then $2,000,000,000. That's 2 billion dollars! If the mill rate for 2020 was $9.50 per $1,000, then the total tax revenue raised would have been $19,000,000. For the owner of an average home the 2020 tax bill would then have been $3800. A zero percent tax increase in 2021 means that city tax revenues form those same 5,000 home owners would remain fixed at $19,000,000.
Unusually, average house prices fell in Beaumont by about 3% from 2020 to 2021. So the value of an average home would now be about $388,000. The total value of those 5,000 homes consequently also fell by 3% to $1,940,000,000. So to raise the same $19,000,000 tax revenue as we did in 2020, the mill rate must now increase to $9.79 per $1,000. And the owner of a completely average home, now valued at $388,000 still has a tax bill of $3800 in 2021. But most Beaumont residents do not live in completely average homes. The great majority of homes lie in a range of $900,000 to $200,000 depending on size, age and other factors. And assessed valuations of every home will rise and fall over time. Some will have held their value, some will have risen in value despite the average 3% drop, and others will have fallen by more than that 3% average. It's just the average value of all the homes combined that has fallen by 3%. So, If my home held its 2020 valuation of $400,000, then my tax bill will rise to $3916 because most other homes declined in value. If my home did really well, and increased its valuation to $410,000 then my tax bill rises even more to $4014. And if my home declined in value, by more than the average 3%, to $370,000 then my tax bill falls to $3622.
So, even with a zero percent tax increase, your property tax bill may rise or fall, depending on how much the assessed value of your home changed, not in absolute dollars, but versus the average change in all the other residential properties in Beaumont.
Beaumont Housing prices 2015-2021. Source: Beaumont Consolidated Budget 2021