Property tax rates same for residential, commercial in Vegas
April Corbin Girunus
(Nevada Current) Las Vegas is among a minority of large U.S. cities whose property tax system does not favor homeowners over commercial property owners.
That is one takeaway from a new analysis of 2023 tax collection in large cities, released last month by the Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence.
The report notes that more than three-quarters of large cities have classified property tax systems that benefit homeowners relative to businesses. Typically this means the cities offer homestead exemptions (where a set amount is exempt from taxation) or assess a higher tax rate for commercial properties.
“Las Vegas is one of a quarter of cities that do not (favor homeowners),” says Adam Langley, associate director of tax policy at the Lincoln Institute. “So, 1-in-4. I would not say that not classifying is peculiar, but it’s not the norm.”
According to the report, commercial properties nationwide on average face a tax rate 86% higher than that of homesteads, and nearly a third of cities have an effective commercial property tax rate that is at least double what homesteads face.
Nationally, the effective tax rate for commercial properties is 1.81% and for median-valued homes is 1.288%.
In Las Vegas, the effective property tax rate for both homes and commercial properties is the same — 1.134%.
As a result, the effective property tax rate for median-valued homes in Las Vegas is 12% below the national average while the effective property tax rate for commercial properties is 40% below the national average.
Las Vegas’s property tax rate was 30th highest among the 53 cities analyzed, but its tax bill — the raw amount paid — was 13th highest and 16% above national average. That reflects home prices in Southern Nevada being higher than the national average.
Overall, says Langley, property tax rates in Las Vegas “are not exceptionally high or low,” though he acknowledged it may not necessarily feel that way to residents.
Looking back nearly a decade, to 2014, the city’s effective tax rate was exactly the same as it is today, but the tax bill was 30% below national average. Median home values in the area in 2014 were below the national average. Median home value in Las Vegas is now 17% above the national average.
With rapidly rising home values and the potential for higher property tax bills, “there often is a public demand to do something, to have some changes to property taxes,” said Langley.
Nevada implemented property assessment caps in 2005 in response to skyrocketing land and home values.
At the same time, some policymakers have pointed to property tax as having the best potential for raising revenue for much-needed state services, especially K-12 public schools. Like sales tax, property tax is broad enough to bring in significant amounts of money, but unlike sales tax it is progressive and typically does not disproportionately impact low-income people.
But legislative efforts to adjust property tax rates or existing property tax caps have been met with strong opposition.
The Lincoln Institute report on taxation doesn’t formally make recommendations for cities, but Langley notes the report provides a strong argument that property tax caps can create deep inequities between homeowners depending on how long they have owned their home.
Langley said that policymakers must look at a myriad of factors when determining whether and how their property taxes should be changed. In addition to high home values, the report notes that other key contributing factors for Nevada are its low reliance on property tax and low government spending.
“It’s really important to remember that property taxes should never be evaluated on their own,” said Langley. “They’re part of a package of taxes and services.”