Taxing land and buildings is one of the oldest forms of taxation in the U.S. Before income and sales taxes, local governments used property-based taxes to finance most of their activities. Property taxes remain a major source of revenue for local governments.
Tax dollars help support the functions and services of specific local organizations. A taxing authority like a county, city, town, hospital, refuse collection, school, or other special district, is a legal entity of the government with elected or appointed officers who serve a distinct geographic area. The local taxing authority (e.g. the county or municipal government) uses one of two methods to calculate the property tax rate:
State constitutions or statutes commonly impose rate limitations. Many states set a maximum rate for each class of government (e.g., school, city, or county). Because real property can be located in overlapping tax districts (e.g. schools and towns), the total tax rates will vary from one neighborhood to another.
This results in more than one local taxing authority calculating tax rates for the property. Many jurisdictions aggregate these rates, resulting in a single tax levy called a "consolidated", "overall", or "composite" levy.
For more information on taxes, generally visit FindLaw's Tax Center.