Question

In calculating the tax base of an area:

a. Exemptions are added to assessed values
b. Exemptions are subtracted from assessed values
c. The tax levy is added to the budget shortfall
d. The millage rate is multiplied by the tax levy

Answer 1

Exemptions are subtracted from assessed values when calculating an area's tax base. This determines the taxable property within a jurisdiction, which is essential for local government funding. The correct answer to the student’s question would be 'b.

Step-by-step explanation:

In calculating the tax base of an area, exemptions are typically subtracted from assessed values. Tax exemptions reduce the taxable portion of an entity’s assessed value. For example, if certain properties like those occupied by colleges or churches are exempt from taxation, the value of these properties will be subtracted from the total assessed value of all properties within the jurisdiction to arrive at the taxable base. Therefore, the correct answer to the student’s question would be 'b. Exemptions are subtracted from assessed values'. Property taxes are especially important for local governments as they are a primary source of revenue to fund local services. The dependence on property tax revenue can lead to challenges, especially when there are large amounts of tax-exempt properties, like in the case of Boston where almost half of the property value is tax-exempt.