Letter Re: Property Tax Rates as Criterion in Choosing Retreat Locales

Hi James,
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I currently live in Oregon which has a pretty high tax rate on real estate. I was considering a retreat location in Oregon, but now am considering property to pass on to my heirs without the burden of annual property taxes. Are there states west of the Rockies with no, or very low, real estate taxes? – JB in Oregon

JWR Replies: When evaluating retreat locales, I try to look at more than just one tax, since experience has shown that state and county governments get their taxes one way or another. (See my Retreat Locales web page for some details.) There are definitely some offsetting factors. In Oregon, for example, you have no sales tax, but high property taxes, especially in the more heavily populated counties west of the Cascade mountain chain. Nevada has no income taxes, but very high car registration fees.

Let’s back up and consider “The Big Picture”: The overall tax burden tends to be higher is states with large, pretentious, Nanny State governments. California, Oregon, Washington, and Colorado are all headed in that direction. When big city liberals move into a state, they bring their attitudes with them. They all seem to expect the same city and county services that they were accustomed to. If enough liberals move in, they eventually gain a majority (or at least a vocal minority) and get their way. Both higher taxes and busybody government soon follow.

On a side note, in the early days of SurvivalBlog, I discussed the advantages of what I call “the state line jumping line game”. This is where you live in close proximity to a state line, so that you can take advantage of differentials in taxation, just across the state line. These advantages can be dramatic. One example of this is living in Washington State, where there is no personal income tax, but shopping across the state line in Oregon, where there is no sales tax.

Regarding property taxes, keep in mind that they can vary widely within states, depending on the city and county where you reside. In general, the more lightly-populated counties have the lowest tax rates. (This is just one more reason to head to the hinterboonies!) In some states, such as Oregon, the differences between counties can be significant. Oregon also has a tax abatement program for agricultural land and timber land. This tends to skew the statistics.Also, Ballot Measure 50 changed the property tax system to a rate-based structure. This effectively slowed the increase in taxes.

One web site with a good variety of fairly up-to-date tax data is RetirementLiving.com. In particular, see their sub-page on property tax rates. Their data is based on a 2005 study by economists at the National Association of Home Builders (NAHB.) I gleaned the following list of the property tax rates in my 19 “top pick” western states (shown in order of my subjective retreat potential ranking. I have added some parenthetical notes). Note that this list only includes an average of state level tax rates. (Again, they will often vary within city and county jurisdictions):

Median Property Tax Rate (Per $1,000 of Assessed Value):

US Average: $9.64

1 Idaho: $9.09 (Deep tax discounts are available for holders of agricultural or timber exemptions)
2 Montana: $9.95 (No sales tax)
3 Oregon: $9.49 (No sales tax)
4 Washington: $9.88 (No income tax)
5 Wyoming: $5.46 (No income tax)
6 Utah: $6.76 (Fairly low sales and gasoline taxes.)
7 South Dakota: $13.81 (Low sales and gasoline taxes.)
8 North Dakota: $14.97 (Low income tax and gasoline taxes.)
9 Arizona: $6.11 (No building code or permits in some rural counties. Low gasoline and income taxes.)
10 Colorado: $5.81 (Low sales and gasoline taxes.)
11 Nebraska: $16.69 (Fairly low income tax.)
12 Kansas: $12.40 (Fairly low income tax.)
13 Texas: $18.17 (The highest of any of the western states. Thankfully, however, it has no state income tax and plenty of homeschooling freedom)
14 Nevada: $5.10 (If taxes were my only criteria, Nevada and Wyoming would top my list, since neither state has an income tax.)
15 New Mexico: $5.63 (Low gasoline and income taxes.)
16 Arkansas: $5.25 (Low gasoline and income taxes.)
17 Oklahoma: $7.13 (Low income tax and gasoline taxes.)
18 Louisiana: $1.72 (Note: With a very substantial homeowner’s exemption, Louisiana has lowest property tax rate in the nation!)
19 California: $4.77 (Has a top income tax rate of 9.3%, very high building permit costs, and painfully high sales tax rates.)

Again, I believe that the total tax burden is a far more relevant figure, unless your only concern is property tax. In picking a retreat locale, look at the big picture. You have to consider climate,, length of growing season, overall self-sufficiency of the citizenry, population density, gun laws, cost of living, fuel taxes, income tax, sales tax, and many other factors. For example, consider some of the following

Overall Tax Burden by State

State Income Tax Rates

State Sales Tax Rates

Cost of Living Comparison

In my opinion, beyond just looking at taxes, the freedom factor should be a paramount consideration. For example, gun laws are crucial for most of us that are preparedness-minded. Depending on your age and interest in true independence from “the system” you might also consider factors like home schooling laws and home birth laws. In your case, you need to consider not merely how much land you will be passing on to your heirs (and its level of taxation), but also how much individual liberty you are passing on to them. Beyond property tax rates, you must also consider the cost of doing anything with a piece of land. There is often a labyrinth of zoning laws, building codes, environmental impact studies, “mitigation” fees, and expensive building permits. In the more populous parts of Oregon, just getting permits can add $20,000 to $60,000 to the cost of building a house. In contrast, consider that at least outside of city limits in many counties in Idaho, Montana, and Arizona, there are no building permits required, and in some locales there isn’t even an official building code enforced. That would seem like a veritable exodus from bondage, to many Oregonian house builders.

Again, in my estimation, Oregon, Washington, and Colorado are all getting “Californicated”. In the long term, the politics, taxes, zoning, and intrusiveness of government will soon approach levels resembling California. This cultural shift has become so obvious, that some folks in eastern Oregon and eastern Washington are now calling for secession or a re-alignment of state lines to create a new state.(Many of the people living east of the Cascades want no part of the liberal-do-gooder mentality that pervades the state capitols in Salem and Olympia.)

A Note on California: California has a splendid climate and a long growing season in much of the state. I am a fourth-generation descendant of California pioneers. I have dozens of relatives in the state. With these deep roots, you would think that I’d be motivated to live there. But I would never consider moving back to California. Why not? The state has some of the most draconian gun laws in the country. It also has plenty of crime, traffic, and unhealthful smoggy air. Also, consider that a California appellate court decision recently outlawed home schooling except by credentialed teachers. Forget California, folks!