The correlation coefficient: property taxes and sales taxes

Digitize, store, and access the sales and use tax documents needed to improve compliance and streamline audit defense.

Property taxes fluctuate across U.S. states and localities, and the scope of the variance is a bit startling. The relationship between property tax reductions and sales tax rates in the U.S. also may surprise indirect tax professionals.

Let’s start with state-by-state (including local jurisdictions) property tax rate fluctuations. One way to gauge the differences is by looking at the property tax collections per capita in each state. By this measure, property tax burdens are highest in the Northeastern states, according to 2024 Tax Foundation research based on 2021 data. To review this information, go to the Tax Foundation’s 2024 Facts & Figures landing page and then select Table 34 (State & Local Property Tax Collections per Capita). 

Residents of New Jersey ($3,539 per capita) paid the most, followed by New York ($3,359), New Hampshire ($3,294), Connecticut ($3,292) and Vermont ($2,991). At the other end of the scale, Alabama residents had the lightest property tax burden at $658 per person, followed by Arkansas ($831), Oklahoma ($914), Tennessee ($921) and New Mexico ($936). 

Last year, several states – including Indiana, Montana, and Rhode Island – considered legislative proposals to reexamine property tax rates and/or enact some form of reduction or relief, according to the Tax Foundation. Nearly all states anticipate revenues remaining well above pre-pandemic levels, the report notes, and “lawmakers across the country are responding with pro-growth, pro-taxpayer reforms.” Wisconsin has already moved decisively in this direction with the June 2023 repeal of its personal property tax for assessments that began this January.

While this is good news for corporate and individual taxpayers (at least for now), indirect tax leaders should monitor the potential implications for indirect tax. Lawmakers may see an increase in sales tax rates as a viable counterbalance for the loss of revenue resulting from property tax rollbacks if fiscal conditions deteriorate. And a growing collection of signs suggest that may be happening, with the end of federal pandemic funding and the growing use of sales tax holidays and exemptions. 

Particularly at the local level, jurisdictions may need to increase sales tax rates in new areas, implement new fees and extend sales taxes to new areas – such as digital goods and services. Additionally, in the urban cores (not suburbia) degradation of the commercial property values is grossly affecting property tax collections. This loss of revenue, while significant, is being addressed proactively by cities by either raising the sales tax rate or actively converting commercial properties into personal residences (in order to shore up the property base). 

Blog Author

Michael J. Bernard, Chief Tax Officer – Transaction Tax at Vertex Inc. Vertex's Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement, and emerging technology trends on global tax department operations.

Michael J. Bernard

Chief Tax Officer, Transaction Tax

Alle Veröffentlichungen von Michael Ansehen

Michael Bernard ist der Chief Tax Officer von Transaction Tax. In seiner Rolle bietet er Einblicke und Denkanstöße zu den Abläufen in der Steuerabteilung, der indirekten Steuererhebung in den USA, dem Steuerrisikomanagement und der Steuerpolitik sowie zu neuen Trends im Bereich Steuern. Er ist ein Steueranwalt auf Führungsebene mit vielfältiger Erfahrung in den Bereichen Unternehmenssteuern, Verwaltung sowie Finanzen und hat fundierte Kenntnisse des US-amerikanischen und internationalen Steuerrechts.

Bevor er zu Vertex kam, war Herr Bernard 28 Jahre lang in verschiedenen Führungspositionen im Bereich Steuern bei der Microsoft Corporation tätig, zuletzt als Senior Director – Tax Counsel. Herr Bernard leitete Teams in den folgenden Funktionsbereichen: Streitigkeiten im Zusammenhang mit direkter und indirekter Besteuerung, Vertrieb und Nutzung, Geschäftslizenzen, Eigentum, Steuer-IT, SOX und Telekommunikation. Er leitete auch eine Steuerzahlervertretung für Unternehmen beim Washington Department of Revenue und war Vorstandsmitglied des Washington Research Council. Herr Bernard hat außerdem bereits vor Verwaltungs- und gesetzgebenden Institutionen auf Bundes- und Staatsebene ausgesagt.

Herr Bernard hat sowohl einen J.D. als auch einen Bachelor of Science in Business Administration von der Creighton University. Er ist Teilzeitdozent für Recht im Master-of-Law-Programm an der University of Washington School of Law. Herr Bernard war außerdem fast 25 Jahre lang Mitglied des Vorstands, des Exekutivausschusses und Vorsitzender von Ausschüssen des Tax Executives Institute (TEI).

View Newsletter Signup