How Does Your State Score on Property Tax Administration? Probably Not Very Well

by Liz Malm, The Tax Foundation, October 08, 2014

Though the amount of taxes we pay is important, the manner in which we pay them is equally worth considering. Last month, the Council on State Taxation (COST) and the International Property Tax Institute (IPTI) released a scorecard grading countries (and the states, which I’m most interested in) on their property tax administration practices.

The piece has a great objective: 

Fair and efficient property tax administration is critically important to both individual and business taxpayers around the world…The purpose of this [report] is to provide an international scope for tax policymakers…, with best practices and a comparative measure of the fairness and efficiency of their property tax administrative practices. It is a common truth that taxpayers are more willing to comply with a property tax system that is perceived as fair and efficient. Accordingly, it is our hope that this Scorecard will drive changes to ensure property taxes around the world are administered more effectively, fairly, and without perceptions of bias or undue administrative burdens.

The scorecard ranks jurisdictions based on:

• Transparency (“adequate explanation of the law and regulations on a jurisdiction’s website, adequate notice of a proposed valuation, and the ability to compare values place on other properties in the jurisdictions without disclosing confidential information”);
• Simplicity and Consistency (“tax forms, filing dates, assessment rates/ratios, and appraisal periods must be consistent, and centralized oversight of local assessors’ practices should be the norm”); and
• Procedural Fairness (“sufficient amount of time to file an appeal, a balanced and reasonable burden of proof, a…review to an independent arbiter of an assessor’s or a property tax board’s findings, …the ability to partially pay or escrow any disputed tax, [and] the interest rate paid on refunds of overpaid taxes is at the same interest rate levied on the underpayment of taxes”).

Each jurisdiction is then given an overall grade based on these three categories. Though the paper has an international focus, I’m going to zoom in on the state-level rankings. Below is a chart showing each state’s overall score.

Click to enlarge.

No states received an A level grade, but 10 states received B level grades (purple bars in chart). Oregon scores the best out of the 50 U.S. states, earning an overall grade of B+, followed by Indiana with a B. Most states received C level scores (green bars). On the other end of the spectrum, six states received D+ or D grades: Connecticut, Delaware, Hawaii, Nevada, Pennsylvania, and Rhode Island (blue bars).

Well administered taxes encourage voluntary compliance, and simple and transparent tax codes are something all states should strive for. Congrats to Oregon! Other states should follow its lead.

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Note that these scores do not reflect property tax rates or property tax liabilities. Check out the original report here. For a more detailed explanation of each category, start on page 7 of the report. There is also a detailed scorecard for each state beginning on page 13.