Understanding the Effective Tax Rate

The Effective Tax Rate is an important concept in both property taxes in general, and in the Texas Truth in Taxation act. The truth in taxation act basically requires that a taxing jurisdiction (any one levying property taxes) publish an effective rate each year, so that people have a way to tell if the entity is raising property taxes or not.

How Ad Valorem Taxes Work

Ad Valorem taxes are what people commonly know as property taxes. Property taxes in Corinth represent about half of the City's total revenues in any given fiscal year. You can see that knowing how ad valorem taxes work is important.

The actual tax levied on any single property is based on the appraised value of that property and the tax rate. If the tax rate stays the same from one year to the next, the actual tax levied goes up only if the property value goes up. Likewise if the property value goes down, the actual tax levied also goes down.

AV Property values

Property valuations are very slightly up compared to last year's certified property valuation for the City of Corinth. The certified property valuation reports were published at the end of July. The total property valuation for the city is used to determine the property tax rate necessary for the next fiscal year budget (starts in October 2012).

State law ties the effective tax rate to the comparison of this year's net property valuation in the city with the certified appraised value from last year. Essentially the effective rate is defined to set a rate that would generate the same property taxes overall for the city on existing properties as last year's actual property tax rate generated on last year's certified appraisal value. Of course the law is not actually that simple - it is a convoluted and tortuous path from the two appraisal values to the effective rate for this upcoming year.