Property tax collection is a critical source of revenue for local governments, accounting for 72 percent of local tax collections nationwide in 2015 (most recent data available). Local property taxes are largely used to fund police departments, emergency services, road maintenance, and other services mainly associated with property ownership or residency.
While states used to rely heavily on property taxes as a source of revenue, this reliance has declined over time. In 2015, state-levied property taxes accounted for only 1.7 percent of state tax collections nationwide, down from 52.6 percent in 1902.
Even with decreasing dependence among states, the extent to which localities rely on property taxes resulted in property taxes comprising 31.1 percent of all U.S. state and local tax collections in fiscal year (FY) 2015. As such, property taxes are the largest source of combined state and local tax collections, trailed by general sales taxes (23.5 percent), individual income taxes (23.5 percent), corporate income taxes (3.7 percent), and other sources (18.2 percent).
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