Understanding the Mill Levy
A mill levy, commonly referred to as a property tax, is a critical funding mechanism used by various tax jurisdictions to finance public services such as education, parks, and emergency services. The process of setting a mill levy involves calculating the amount of money each tax jurisdiction needs for its budget in the upcoming year. This amount is then based on the assessed value of properties within the area.
How Mill Levies Work
Multiple taxing authorities—be it school districts, county commissioners, or city councils—may operate within a single area. They each impose a certain mill rate to cover their budgetary requirements. The term “mill” signifies a tax amount per $1,000 of assessed property value. Essentially, each “mill” in the tax rate equals $1 in tax per $1,000 in assessed value.
To set this rate, jurisdictions use an assessment ratio—a percentage that determines the taxable value of properties. A property’s taxable base is annually assessed by a tax assessor; however, it might also reflect a percentage of its market value.
Example: Calculating a Mill Levy
Consider an area where the total assessed property value is $1 billion. Suppose the budgets required are as follows: the school district needs $100 million, the county requires $10 million, and the city mandates $50 million. The school district’s mill levy would be 0.10 (or 100 mills), the county’s at 0.01 (or 10 mills), and the city’s at 0.05 (or 50 mills). Consequently, the total mill levy for the area would be 0.16, or 160 mills.
Key Takeaways
- Mill Levy Defined: A tax rate applied based on the assessed value of property, expressed in mills.
- Purpose of Mill Leveys: To raise funds for public services within a tax jurisdiction.
- Calculating Mill Levies: Done by dividing needed revenue by total property value, then summing up individual jurisdiction rates.
Related Terms
- Property Tax: A levy on property that the owner pays, a primary source of revenue for local governments.
- Assessed Value: The dollar value assigned to a property for purposes of measuring applicable taxes.
- Tax Assessor: An official who evaluates property values for taxation purposes.
- Market Value: The likely selling price of a property under normal conditions.
Further Reading
To dive deeper into the nuances of property taxes and mill levies, consider the following books:
- “The Property Tax School” by Alan S. Evans - A comprehensive guide on how property taxes are calculated and assessed across different jurisdictions.
- “Financing Local Government” by Nicholas Henry - This book provides insights into the various revenue mechanisms, including property taxes, used by local governments.
Mill levies might sound like just another dreary tax topic, but when you think about it, without them, who would keep the parks so clean, the schools so equipped, and the streets so safe? So the next time you sigh as you write that property tax check, just remember: it’s your contribution to making every mill count!
