How to Understand Your Tax Bill

The old saying is true. The only money the government has to spend does come from us. All of the services, from the U.S. Army at the national level to the wastewater treatment plant at the local level are provided by the citizens who benefit from them. The federal government taxes income and returns some to the taxpayers in social security and medicare. Article I section 8 of the U.S. Constitution gives Congress the power to "lay duties, impostes and excises", so long as they are uniform throughout the country. Congress, by the way, also has the responsibility of paying all the bills. States have varied patterns of taxation, most all consisting of a combination of income, sales and excise taxes. Some of the taxes collected by the federal and state governments is returned directly to the people in revenue sharing to local governments. All municipal governments must levy taxes to make up the difference between what they are given by the state and federal governments and the revenue required to provide essentioal services. When revenue sharing is decreased, local government must make up for the shortfall by raising the only sources of income that they have, namely property, sales or special assessments.

Instructions

Difficulty: Moderately Easy

1. Look carefully at your bill. You should be able to find your name, your legal address and a legal description of your property. This description is usually a "parcel" or "lot" number or description.
2. You should also find a list of all of the units of government and the percentage each recieves. This is called the mil rate. For example, if the local school district has a rate of .00045123, this means that they receive a bit more than forty five cents on each dollar you pay. The local junior college may tax at a rate of .0000531. They collect only a nickel since their taxing district is probably much larger than a local school district.
3. Find your "assessed valuation" for your property. This figure is the city uses to calculate what you pay in taxes. Local governments assess value by periodically estimating the worth of a property and then reporting it to the person (usually the city or county clerk) who calculates, processes and delivers the tax bills. The formulas for assessment vary by state, but if your assessed valuation is, say $180,000 and your combined mil rate is .035. If you multiply .035 times 1,000 times 180, you should end up with a total tax bill of about $6300.
4. Your bill will contain a location and a deadline for payment of your taxes. If your bank pays this bill with an escrow account you've set up for the purpose, be sure that they have received a copy of the bill, particularly if your mortgage is new.

Tips & Warnings

• Local tax bills always arrive with a notice explaining how you can contest or apply for "relief." Usually this involves a hearing or lists hours and locations where you may question your taxes.
• The tax levy, which taxing bodies decide at their budgeting sessions, is the amount they'll need to operate. The milrate is percentage that they will need from each thousand dollars worth of assessed valuation based on the most recent total valuation of property in the tax diostrict. The tax levy may not exceed the revenue needed to operate. It is generally stated as a mil rate.
• As more people have problems paying taxes, city and county treasurers are becoming more flexible and creative in helping people pay them. In addition to the tax escrow that banks offer mortgage holders, counties and cities often have installment plans. Check with your local treasurer to see if a plan is available.
• Be sure to correct any inaccuracies on your tax bill. Incorrect names or spellings may be a clue that the same errors occur on your mortgage papers or on the deed to your property. Since you see your tax bill more frequently than the other legal documents, errors on your tax bill can alert you to problems elsewhere.