Property taxes are an important source of revenue for local governments in every state. This includes general-purpose government entities, such as cities and counties, as well as special-purpose governments, typically known as special assessment districts or school districts. State law establishes the powers and duties for these various districts, which usually include the power to levy taxes.
Public School Districts Can Levy Taxes
Nearly all public school systems in the United States are independent systems that function as local governments. Like cities and counties, an independent school district has defined geographical boundaries, provides services and facilities, and has a governing board that is accountable for its activities. In most states, a school district has the power to levy taxes. In some states such as Ohio, a school district can levy taxes on income as well as property.
Special Districts Are Funded With General and Special Taxes
A special district is formed for a variety of purposes that provide specific public infrastructure or services. Services provided by a special district may include fire control, emergency medical services, flood control, and community colleges. In some states, such as California, special districts are partially funded with general taxes, meaning that the district receives a portion of the property taxes levied by local counties. These same districts can generally levy their own special taxes in addition to general property taxes. State laws commonly give special districts the authority to impose sales taxes as well as property taxes.
Voter Approval May Be Needed
Although special districts have the power to levy taxes, state law may require voter approval for certain levies. For example, California law requires a special district to obtain voter approval before it can collect a tax greater than what is allotted out of the general property tax assessment. For some types of general bond obligations, the special district must obtain approval from two-thirds of the voters.
Special Districts Cause Problems in Some States
Special districts are created under state law, and requirements vary from state to state. Some states have seen a proliferation of special districts as a way to avoid using general taxes to pay for services normally provided by local government, such as water and transportation. In Texas, for example, the majority of the taxes assessed on a property tax bill may be levied by numerous special districts rather than the general county property tax assessment.
A Tax Lawyer Can Help
The law surrounding districts that can level property taxes is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact an attorney that specializes in property tax law.