How is the Tax Rate calculated?

The tax rate is primarily determined by dividing the budget of a municipality by the tax base. This method provides a clear calculation of how much revenue the municipality needs to generate from property taxes in order to fund its budgetary requirements. The tax base represents the total assessed value of all properties within the municipality that are subject to taxation.

When a municipality prepares its budget, it estimates how much money it needs to collect through property taxes to cover services like infrastructure, public safety, and education. By knowing the total value of all taxable properties, the municipality can set a tax rate that, when applied to the assessed values of properties, will yield the necessary revenue.

Other methods mentioned, such as multiplying assessed value by a set percentage, may refer to a specific tax calculation, but they are not how the tax rate is established. Evaluating property market values or assessing tax exemptions while important for different aspects of property taxation does not directly relate to the computation of the tax rate itself. Therefore, understanding that the fundamental approach to calculating a tax rate is based on the municipal budget and the tax base is crucial for grasping property taxation principles.