Higher House Values Boost Virginia Homeowners’ Tax Bills; Residential Tax Rates Hold Steady Or Decline In Many Areas; Local Taxes Also Rise On Meals, Lodgings And Cigarettes
December 21, 2004 --
The rapid rise of house prices has translated into higher tax bills for Virginia’s homeowners, while permitting many local governments to collect more revenue and cut or hold the line on tax rates for residential real estate at the same time.
For example, a house valued at $210,000 last year would have had a tax bill of $1,512, assuming a tax rate of $0.72 per $100 of assessed value. If the assessed value increased by 9 percent this year, but the statutory tax rate remained unchanged, the homeowner’s tax bill would rise by 10 percent, or $151.
This year, 31 of Virginia’s 134 cities and counties reduced their tax rates on residential real estate and 74 left them untouched, according to the 2004 edition of “Tax Rates in Virginia’s Cities, Counties, and Selected Towns,” by John L. Knapp and Stephen C. Kulp, economists with the University of Virginia’s Weldon Cooper Center for Public Service, which publishes the annual tax study and reference book.
“The real property tax is by far the most important source of local tax revenue, averaging 56 percent of total taxes collected by cities and counties,” Knapp said. “In many cases, rising property values have allowed local governments to keep pace with rising costs without having to raise property tax rates.”
Only 29 Virginia localities raised their rates this year, and many of them were areas that reassess infrequently — and had not re-evaluated in several years, according to the study. “Most of Virginia’s urban areas have full-time professional staffs that reassess property every one or two years, which enables them to keep up with rapidly rising values,” Kulp said.
MEALS AND LODGINGS TAXES
In contrast to property taxes, which fall primarily on residents, meals and lodging taxes are popular methods of raising tax revenue because a significant portion of the burden is seen as being “exported” to visitors, the study notes. All of Virginia’s 76 cities and 37 counties impose a meals tax. The median rate is 4 percent.
Four localities raised their meals taxes this year. When combined with the recently increased state sales tax of 4 percent and the 1 percent local option sales tax, the median combined tax rate on restaurant food in Virginia is now a hefty 9 percent and runs as high as 11.5 percent in six cities, according to the study. Meals taxes apply to any food sold by a restaurant, from fast-food burgers to gourmet dinners.
Motel and hotel taxes were increased in five cities and two counties. The median rate for lodging taxes in the 92 cities and counties that impose the tax is now 5 percent. When combined with the 5 percent state and local sales tax, the median tax rate on lodging is 10 percent. In 10 localities, the combined state and local taxes on lodgings equal 13 percent.
Cigarette smokers in Virginia were dealt a double whammy in 2004. The commonwealth raised its per-package tax rate from 2.5 cents to 25 cents, and 14 cities and counties raised their local rates as well. For the 32 cities and counties that tax cigarettes, the median local rate is 25 cents per pack of 20 cigarettes.
Virginia reimburses localities for revenue lost from car tax reductions. The Virginia Personal Property Tax Relief Act of 1997 compensates localities on the basis of the rate in place when the legislation went into effect. However, localities are not precluded from raising personal property tax rates to raise additional revenues — an action taken by 24 counties and one city since 1997. These counties include: Alleghany, Amelia, Amherst, Buckingham, Campbell, Cumberland, Giles, Grayson, Halifax, Henry, Highland, King and Queen, King William, Lee, Louisa, Mathews, Mecklenburg, Page, Patrick, Pulaski, Rappahannock, Rockbridge, Scott, Wythe and the city of Radford.
2004 EDITION OF VIRGINA’S “TAX RATES”
The just-published, 2004 edition of “Tax Rates in Virginia’s Cities, Counties, and Selected Towns,” is an invaluable resource for journalists, tax analysts and government officials. It contains detailed information on taxes levied in all of Virginia’s 95 counties, 39 cities and 155 towns. The study, now in its 23rd year, is based on an annual survey conducted by the business and economics section of U.Va.’s Cooper Center for Public Service.
This 293-page, $35 reference volume includes information on the provisions in the Virginia Code applicable to each tax and in-depth explanations of how taxes are calculated and applied. The volume also includes a summary of major 2004 General Assembly legislation affecting local taxes, and the names and phone numbers of local tax officials.
The new study also contains the Web addresses of the Virginia local governments that maintain Web sites — 32 cities, 72 counties and 67 towns — many of which provide information on local taxes and government expenditures.
For more information about the study, call John Knapp at (434) 982-5604 or Steve Kulp at (434) 982-5638. To order a copy of the reference book, visit the Web site: http://www.coopercenter.org/publications/sitefiles/economics/tr04flyer.pdf.
Contact: Charlotte Crystal, (434) 924-6858