What is a mill rate?

In the wake of countless county, village and town councils setting their 2016 “mill rates”, ECA Review reporter, Dena Clark asked the question, “What is a mill rate?”, only to  have that question quickly followed by, “Why the heck is it called a mill rate?”.

Here are the answers to those questions for those of you who are as equally unfamiliar with the term.
According to investopedia.com, the “mill rate” is the amount of tax payable per dollar of the assessed value of a property.

“The mill rate is based on ‘mills’; as each mill is one-thousandth of a currency unit, one mill is equivalent to one-tenth of a cent or $0.001.

“Property tax in dollar terms is calculated by multiplying the assessed property value and the mill rate and dividing by 1,000.

“As a property may be subject to tax by a number of different authorities, mill rates are set by each taxing authority so as to meet the revenue projections in their budgets.”

How is the mill rate calculated?
According to the Municipal Assessment Agency, “each year, council, during its budgetary process, approves the amount of revenue required to operate the municipality.

“From this amount they subtract the known revenues, such as grants, licences and permits.

“The remainder represents the amount of money to be raised by property taxes. The amount to be raised is divided by the total value of all the property in the municipality and multiplied by 1,000 to decide the tax rate also known as the ‘mill rate’.

“The calculation expressed as an equation is as follows: amount to be raised divided by the total taxable assessment and multiplied by 1,000 equals Mill Rate

“A sample calculation: for example, if a town needs $30,000 to balance its budget and the total taxable assessment for all properties is $5,000,000, then $30,000 (amount to be raised)  divided by $5,000,000 (total taxable assessment) and multiply by 1,000 equals six which makes the mill rate six.

“The mill rate must be applied uniformly throughout the community, although council,  may exempt certain property owners from paying property tax.

“That is why the mill rate is calculated on the total taxable assessment.”

Property tax calculation
The Municipal Assessment Agency goes on to state that “the amount of municipal tax payable by a property owner is calculated by multiplying the mill rate by the assessed value of a property and dividing by 1000.

“For example, the mill rate  multiplied by the assessed value divided by 1,000  equals property tax bill

“Using six as the mill rate, a taxpayer with a property valued at $55,000 would be sent a tax bill for $330, six multiplied by $55,000 then divided by 1,000 equals $330.”

About the author




* indicates required