 What You Don't Know About Your Property Taxes
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Click to learn more about property tax in Washington
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As home values rise, people often assume their property taxes automatically go up too. In fact, that's not the case on Mercer Island...
"Washington is one of just two states where property taxes are levy-based, rather than rate-based. That means rising property values on Mercer Island don't translate to higher revenues for City government," explains City Manager Julie Underwood.
In a rate-based system, used by the other 48 states, a tax rate is typically expressed in dollars per $1,000 of assessed property value (AV). For example, if the rate is $1 per $1,000AV, then the owner of a $1 million home pays $1,000. The total amount collected fluctuates year to year as property values rise or fall.
Under Washington's levy-based system, state law only allows a taxing district to collect a specified total dollar amount (the "levy") each year. If the total value of all property within a jurisdiction falls, the rate is increased in order to raise the required levy amount. But if property values increase, then the rate is actually lowered.
"It's important for Islanders to understand that our region's economic boom and rising home prices don't show up as higher property tax revenue for the city," says Underwood. In fact, the City's property tax levy revenues increase by just the 1% annually that is allowed by state law. The tax rate has actually fallen as property values have steadily climbed during the last decade (except during 2010-2013).
In 2017, the City will collect just over $13 million in property taxes. For a typical homeowner, that equates to $1,171 or 13% of their total property tax bill of $8,841/year (based on median assessed home value of $1.09 million). The rest of the property taxes go to many other entities, such as the School District, Washington State, King County, etc.
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