Where My Property Taxes Go

As we paid off our home this summer, we are now paying property taxes directly for the first time next month, or so says the bill that came in the mail last week. Along with the preposterously low bill ($762 for one year), the good people from the City of Scottsdale provide a breakdown showing where our tax dollars go. And along with each individual charge, they also included a phone number to call if you wanted to ask questions about how that portion of your property tax was spent. So, naturally, I called around, if only to get more grist for the mill here at the blog.

I was completely amazed at how little we have to pay to get world class amenities in our little city. Below is a full outline of what we pay, and where those dollars go (rounded to the nearest dollar). All the information comes from the pleasant & helpful county & city workers who picked up the phone when I called, and who were probably a little surprised that some random taxpayer wanted to ask about every single line item on his tax bill.

Tax Districts

County Primary Tax: $116. These funds are used to run the county government, including courts & jails.

State Equalization Tax: $46. This tax is used to run state government, including the education department.

City of Scottsdale: $48. These go into the city's general fund, to pay general expenses for police, fire, parks, libraries, etc. This is easily my favorite tax, as I use these amenities the most often.

State Aid Credit: [-$125]. Apparently the three items above are just too much for the average homeowner to pay, so instead of paying a total of $211, we only have to pay $89. Thanks, state legislators!

School Districts

Scottsdale Unified District: $304. By far the largest portion of our our property tax goes to educate our city's youth. Having no children of my own, I suppose I could view this negatively. But, hey, it's still a good feeling to know that the lion's share of our taxes are going to pay teachers, maintain schools, and, sure, educate the neighborhood kids.

Community College District: $117. Now we're talking. I love community college, and not just because of the excellent show on NBC. I can study anything from Economics to Equine Science at SCC, all for a fairly reasonable $81 per credit.

Secondary Tax Amounts

Flood control: $13. These thirteen dollars go towards the maintenance of local damns & conduits.

Central Arizona Water Conservation: $13. This is a particularly important issue in our state; it seems like money well spent.

Fire: $1. One flipping dollar. Maybe the most curiously low amount on the entire list, this dollar goes towards county firefighting that's above and beyond that provided by the city.

Library: $4. Just as with the fire tax above, this library tax is assessed county wide and fund libraries in adjacent cities that I often frequent (Tempe, Phoenix, Mesa).

Health Care: $18. This money funds the county hospital, as voters chose to keep it open. Sounds like a good deal to me.

Unified School Overrides: $46. A special tax was voted in by citizens, to both update schools & build new schools.

Various Bonds: $156. This amount covers City Bonds ($69), Unified School Bonds ($65), and Community College Bonds ($22).  These also are voted on by citizens; if an override doesn't pass then bonds can be used to continue the work originally intended to be covered by an override. (Note, I don't really understand what this means, but apparently we chose this tax, so that's nice.)

East Valley Institute of Tech: $5. I didn't even know this school existed, but when I look at their website, I feel really glad that it does exist. Cool stuff for the kids in the valley who now might be better prepared for jobs in IT fields.

Total Annual Property Tax Bill: $762.

After talking to a particularly nice lady at the City of Scottsdale and finding our city's budget online, I learned that property taxes only make up a small percent of the total revenue for the city: about 11% total. The rest of their budget comes from sales tax (42%), shared state revenue (21%, coming from state sales & income tax), charges for services (17%), franchise fees & in lieu (5%), & transfers in (4%). (To see a cool pie chart of the figures, go to page 41 of the budget report.) The state, city, & county sales tax seems to play a major role in our public funding, while property taxes represent a relatively small portion of the revenue. That explains why our sales tax is relatively high in Scottsdale (7.95%) while my property taxes are so dang low.

Conclusions
First and foremost, I think the basket of services we get for our tax dollars here are a preposterous bargain. Even though I pay a good bit more than the $762 in total tax when I consider my sales taxes & income tax, compared to the beautiful parks, libraries, top notch police, fire service, & schools, it's still a great deal no matter how I slice it.

The reason the bargain is so good is that governments offer shared services & amenities. When my neighbors & I pool just a small fraction of our resources for a park, library, or fire protection, we get to share something that is thousands of times better than I could possibly purchase on my own. Because these are all things we all only use occasionally, a huge number of us can share that single park, book, & fire truck. It's also easier for us to right-size the resources for our community; adding a single new library or park for the community is a lot easier than if I try to fill a new bookcase or add 20 more square feet to my back yard. Shared public amenities provide a better basket of services than if I'd tried to make such purchases independently. And it makes me wonder what other kinds of purchases would work better in a communal set up.

The second conclusion I find is that the type of taxation in my community just happens to match up well with our frugal lifestyle. Because we purchase so little, the government's strategy to gain most of its revenue from sales tax misses a big portion of our income. A state or city that decided to get its funding from high property taxes (combined with lower sales taxes) would fit a typical consumer much better, but would pose a poor deal for our family. And because there is no state sales tax on groceries (& the city sales tax is on groceries is particularly low: something close to 1%), a lot of our budget dollars avoid such taxation altogether.

It's not like we picked Arizona because of its tax setup, but going forward when we are selecting a new place to live, we'll definitely consider the tax strategy the local government uses. As long as we are living a lifestyle that involves home-ownership but relatively few material purchases, I think we'll try to lean towards cities with low property taxes coupled with a higher sales tax. After all, even if taxation is a relatively good bargain for us as citizens, there's no reason to pay more than is necessary.

As always, thanks for stopping by and reading. Have a great weekend!