What is tax rate setting and how does it impact the tax bill?

• A. Tax rate is a fixed amount that does not change with levy.
• B. Tax rate is the per-dollar amount applied to assessed value to calculate taxes; rates are driven by the levy and total assessed value.
• C. Tax rate equals the total tax bill.
• D. Tax rate is only important for new construction properties.

Answer: (B)

Tax rate setting is about turning the money a locality needs to raise (the levy) into a per-unit charge on property value. The rate is the amount applied to each dollar of assessed value to compute taxes, and it is determined by the levy in relation to the total assessed value in the tax base. In practice, the tax bill for a property comes from multiplying its assessed value by the tax rate (often expressed per $100 of value). So if the levy increases or total assessed value changes, the rate adjusts accordingly to deliver the needed revenue, and the resulting bills rise or fall with each property's assessed value.

For example, if the levy is $10 million and the total assessed value is $2 billion, the rate is $0.005 per dollar of value (or $0.50 per $100). A property with $300,000 assessed value would owe about $1,500. This shows why the rate is not a fixed amount, why it depends on the levy and the base value, and why the tax bill depends on both the rate and the property's value.