Where Inflation is Causing Property Taxes to Increase the Most

Some states are raising property tax rates to the maximum allowed by law. Is your state on the list?

Wooden houses with graph that shows upward trend on a blue background
(Image credit: Getty)

Some states have laws that allow inflation to dictate higher property taxes. That’s because revenue from property taxes is used to fund police and fire departments, maintain roads, and other initiatives that benefit the public. And when inflation is high, like it is right now, these initiatives require more money to operate. 

For example, the increased cost of living requires salary increases for public workers. So, localities raise property taxes to provide those higher salaries, allowing residents continued access to public services.

Here are some areas in the U.S. where inflation is causing property tax rates to increase to the maximum amount allowed by law. 

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Higher property taxes in Michigan 

Michigan homeowners are facing the highest property tax increase in 28 years, at 5%. But that increase is less than it could have been. That’s because under Michigan law, property taxes can increase by 5% or the rate of inflation, whichever is less. The inflation rate in 2022 could have caused tax rates to jump by nearly 8% in 2023.

This isn’t the first year Michigan homeowners have run into inflation-related tax increases. Pandemic-related inflation, largely due to supply chain issues, increased in 2021. That spike resulted in higher tax levies in 2022. But at 3.3%, the property tax increase didn’t come close to reaching the maximum tax hike of 5% allowed by Michigan law.

Maximum property tax increase in New York 

New York is another state that bases property tax increases on the consumer price index (CPI). And thankfully, the state also has a property tax cap. Property tax levies max out at 2%, but this cap can be overridden by school and local governments.

Unfortunately, many New Yorkers are accustomed to this increase since 2023 marks the third consecutive year inflation rates have surpassed the 2% tax cap.

South Carolina property taxes 

Taxing jurisdictions in South Carolina (for example, school districts and counties) can raise tax rates in accordance with inflation and population increases, according to the South Carolina Revenue and Fiscal Affairs Office. And counties across the state are raising taxes.

  • Lexington County, SC recently approved a 5% property tax increase for the first time in ten years. 
  • Horry County, SC also increased property rates in order to keep up with inflation and population growth. 

Property taxes in Washington

In Washington, some taxing districts (localities, such as towns) can raise property tax levies above the maximum allowed if they have any “banked” dollars from not taxing the maximum amount in previous years. Here are a few examples.

  • The Orcas Cemetery District increased its tax levy 20% from 2022 to 2023.
  • The Town of Friday Harbor increased the tax levy 30.8% from 2022 to 2023.

Voter approval isn't needed for local taxing districts to “play catch-up” on property tax levies. So, Washington homeowners could see significantly higher tax bills, even if they live in an area where local jurisdictions previously imposed lower taxes.

Home values and high property taxes

Inflation isn’t the only factor that drives higher property tax bills. Home values also contribute to property tax amounts. For example, Californians receive some of the highest tax bills in the country, despite the state imposing one of the lowest property tax rates. This is due to the generally high home prices in California.

And even if you don’t live in a state that is raising tax rates, you could experience higher tax bills. Making renovations to your home can increase the taxable value of your property, which can also increase your tax bill. And rising home prices can increase your property taxes, whether you make improvements to your home or not.

Katelyn Washington
Tax Writer

Katelyn has more than 6 years’ experience working in tax and finance. While she specializes in tax content, Katelyn has also written for digital publications on topics including insurance, retirement and financial planning and has had financial advice commissioned by national print publications. She believes that knowledge is the key to success and enjoys helping others reach their goals by providing content that educates and informs.