The Effects of State Personal Property Taxation on Effective Tax Rates for Commercial Property

Commercial properties have considerably different amounts of personal property as part of their total parcel value, depending on the nature of the business situated on the parcel. Given the differences between and even within states in the tax treatment of various types of personal property, different types of businesses can experience very different effective tax rates on parcels with identical real property value. This research explores issues related to the development and application of a methodology to measure these differences and incorporate them into the 50-State Property Tax Comparison Study jointly produced by the Minnesota Center for Fiscal Excellence and the Lincoln Institute of Land Policy. We find that there are considerable differences in effective tax rates between different types of commercial parcels. Rankings can also shift considerably between the results for commercial property as published in the 50-State Study and the various alternatives we explored. Nevertheless, we conclude that the current study assumptions realistically model the property taxes payable on the most common type of commercial property, office property. We also suggest an approach to presenting more information and perspective on the influence of personal property within the 50-State Property Tax Comparison Study.