20
Commercial Property Taxes
Figure 3 shows effective property tax rates for commercial properties worth $1 million dollars
for the largest city in each state. This analysis looks specifically at taxes on office buildings and
other commercial properties without inventory on site. Tax rates for other types of commercial
property will often be similar, but will vary in cities where personal property is taxed differently
than real property. The analysis assumes each property has an additional $200,000 worth of
fixtures, which includes items such as office furniture, equipment, display racks, and tools.
Different types of commercial property will have different proportions of real and personal
property. Therefore, effective tax rates will change between different types of commercial
property in cities where personal property is taxed differently from real property.
The average effective tax rate on commercial properties for the 53 cities in Figure 3 is 1.953
percent. A property worth $1 million with $200,000 in fixtures would thus owe $23,436 in
property taxes (1.953% x $1.2m).
Tax rates vary widely across the 53 cities. Detroit and Chicago both had effective tax rates that
were 2.1 times the average. Bridgeport (CT), Providence, and Des Moines were close behind at
1.9, 1.9, and 1.8 times the average. On the other hand, Cheyenne (WY), Seattle, and Charlotte
(NC) have tax rates that are less than half of the average, and a larger group of cities are between
0.53 and 0.56 of the average, including Boise, Virginia Beach, Honolulu, Fargo, and Billings
(MT).
Wilmington (DE) had the largest increase at 41 percent, with an effective tax rate change from
1.062 percent in 2019 to 1.501 percent in 2020, moving them up from 47
th
to 32
nd
place.
The
change returns Wilmington close to their 2018 ranking of 35
th
place. Nashville’s rate increased
by 34 percent, mirroring the increase in local mill rates, raising their ranking from 48
th
to 37
th
place. Other double-digit increases were found in Chicago (15.5 percent), Sioux Falls and Des
Moines at 13.5 percent, Bridgeport (CT) at 11.5 percent, and Detroit (10 percent).
The largest rate decrease was found in Buffalo (NY), where a 38 percent decrease produced a
drop in ranking from 19
th
to 41
st
place. As was the case with homesteads, local mill rates were
slashed for non-homestead property, although non-homestead properties do continue to have
higher mill rates overall. The only other double-digit decrease was Boise at 13.5 percent, which
was achieved by cutting the local mill rate by 12.4%, and. In addition, Philadelphia, Salt Lake
City, Denver, and Portland (ME) all had decreases of more than 5 percent.
Appendix Table 3a shows how effective tax rates on commercial properties vary based on their
value, showing tax rates for properties worth $100,000, $1 million, and $25 million (all have
For an analysis that looks at how effective tax rates vary between different types of commercial property, see “The
Effects of State Personal Property Taxation on Effective Tax Rates for Commercial Property” by Aaron Twait,
published by the Lincoln Institute of Land Policy (April 2018). The paper finds that average effective tax rates for
payable 2016 exceeded 1.9% for hospitals, restaurants, and office space while wholesale trade facilities encountered
rates roughly half as large. The paper also finds the current study assumptions realistically model the property taxes
payable on the most common type of commercial property – office property.
Wilmington did have a 9% increase in local mill rates, but the change is mainly due to the sales ratio increasing
from 25.9% in 2019 to 33.6% in 2020, which puts the 2020 sales ratio close where it was in 2018 (35.0%).