Analyzing The Property Tax Scorecard: What Does Your State’s Grade Mean for Your Business?
Property taxes are one of the largest business expenses for organizations with multi-property portfolios. In fact, according to the Organization for Economic Co-Operation and Development, in 2017 $530.8 Billion was paid in property tax in the U.S. alone and approximately $300 Billion of this was paid by businesses. Furthermore, property taxes in the U.S. account for almost 39% of the total state and local tax burden imposed on business, exceeding all other business taxes imposed by state and local jurisdictions. Despite this, the property tax lifecycle is often ineffectively managed by many organizations as a result of disparate data, siloed teams and insufficient human resources and technology.
Compounding the internal issues associated with property tax management are the challenges associated with the jurisdictions responsible for billing and collecting property taxes. Fair and efficient property tax management is vital to business taxpayers, yet depending on the state or jurisdiction, processes for assessing, billing and communicating with taxpayers can be complicated and unclear — adding to the strain on already overworked tax teams.
In order to drive changes that ensure property taxes are administered more effectively and provide tax policymakers with a comparative measure of fairness, The Council on State Taxation (COST) and the International Property Tax Institute (IPTI) have teamed up to produce a “Scorecard on State and International Property Tax Administrative Practices” (the “Scorecard”).
The Scorecard focuses on three important areas essential for equitable and efficient property tax administration: 1) transparency, 2) consistency, and 3) procedural fairness, giving them a letter grade between A-F in each category. With the goal of tracking elements that can be objectively measured throughout the property tax system, the report illuminates gaps in jurisdictional processes.
While there were many jurisdictions from around the world that scored less than favorably in one or more category on the scorecard, the United States had some of the lowest scoring jurisdictions overall. The lowest average grade scored by a taxing jurisdiction outside of the United States was a C-; earned by the province of Quebec in Canada, New Zealand, and South Africa. Alarmingly, over 25% of the American jurisdictions scored lower than the lowest score found outside of the U.S, with thirteen states garnering results between an F and D:
|Mississippi F||Delaware D|
|Pennsylvania F||Alaska D+|
|Hawaii D-||Illinois D+|
|Massachusetts D-||Louisiana D+|
|New York D-||North Dakota D+|
|Rhode Island D-||Ohio D+|
|West Virginia D-|
On top of this, over 53% of the states scored a D or lower in one or more category, with the largest number of jurisdictions failing in the category of procedural fairness. The implications of such poor scores are quite serious for American business. For those organizations that own, operate or manage multi-property portfolios, having to navigate such a complicated, and often unfair system can make it difficult to mitigate property taxes. Since property tax is one of the largest expenses, this can have a significant financial impact.
See the chart below for a list of the top rated jurisdictions in the United States:
|Georgia B+||Maryland B-|
|Kansas B+||South Carolina B-|
|Florida B||Indiana B-|
Explore the full results of the IPTI-COST property tax Scorecard to learn more about the scoring in your jurisdiction and find out how your state’s grade might be impacting your business.