USE THE FOLLOWING DATA TO ANSWER THE QUESTION.
Hicksville has a proposed budget of $7,000,000 for the fiscal year. The city has an assessed value of $100,000,000 and will receive state aid of $100 per capita based on its 2000 census population of 15,000. Assessed value equals 25% of market value.

-What is the effective tax rate in Hicksville?

Question

USE THE FOLLOWING DATA TO ANSWER THE QUESTION.
Hicksville has a proposed budget of $7,000,000 for the fiscal year. The city has an assessed value of $100,000,000 and will receive state aid of $100 per capita based on its 2000 census population of 15,000. Assessed value equals 25% of market value.

-What is the effective tax rate in Hicksville?

Quizplus · Accepted Answer

The effective tax rate is calculated by dividing the total amount to be raised through property taxes by the total assessed value of the city. The total budget is $7,000,000, but Hicksville will also receive state aid of $100 per capita for a population of 15,000, which equals $1,500,000 ($100 * 15,000). Subtracting the state aid from the total budget, we get $5,500,000 ($7,000,000 - $1,500,000) that needs to be raised through property taxes. The assessed value of the city is $100,000,000. Therefore, the effective tax rate is $5,500,000 / $100,000,000 = 0.055 or 5.5%. However, since the assessed value represents 25% of the market value, the effective rate in terms of market value is 0.055 / 4 = 0.01375 or 1.375%, which corresponds to choice A.