Local governments in Missouri are primarily funded by property taxes. Property taxes are an ad valorum tax, which means they are based on the value of the real estate or other property being taxed. Taxable property in Missouri is appraised at its market value, a ratio is applied to the market value to determine the taxable — or assessed — value, and a tax rate is then applied to that value determining the amount owed in taxes. Property taxes fund schools, counties, cities, fire districts, libraries, and other types of smaller taxing districts.

Property taxes are one of the three main types of taxation in the United States, along with sales and income taxes. Like any tax system, property taxes have benefits and costs. The primary benefit is that they are the most effective mechanism for connecting the public services taxpayers use with the tax dollars they pay. Research has determined that the quality and cost of the public services within an area are capitalized into the price of the property. People make choices on where to locate based on their various demands for public services and their different capacities for paying taxes. Local governments respond to those various demands by implementing differing menus of taxation and public services that appeal to different members of the public.

Full Policy Study (PDF)

Four-Page Policy Briefing (PDF)

Related Case Study

Commentary: A $ 109,000 School “Voucher”: A Story of Tax Rates and School Districts

Commentary: Changes to Property Assessment System Would Improve Fairness

Video: Property Taxes in Missouri: Police, Fire, Municipal Bands?