How does Washington State's property tax system work?

As home values rise, people often assume their property taxes automatically go up too.  In fact, that's not the case:  Washington is one of just two states where property taxes are levy-based, rather than rate-based.  That means rising property values on Mercer Island don't translate to higher revenues for your City government or any other taxing jurisdiction.

In a rate-based system, used by the other 48 states, a tax rate is typically expressed in dollars per $1,000 of assessed property value (AV).  For example, if the rate is $1.00 per $1,000 AV, then the owner of a $1.0 million home pays $1,000.  The total amount collected fluctuates year to year as property values rise or fall.  Under Washington's levy-based system, state law only allows a taxing district to collect a specified total dollar amount (the "levy") each year, the annual growth of which is capped at 1% plus an allowance for “new construction.”  If the total assessed value of all property within a jurisdiction goes up, then that jurisdiction’s levy rate is reduced to ensure the authorized amount of property tax is levied.  But, if the total assessed value of all property within a jurisdiction goes down, then that jurisdiction’s levy rate is increased based on the authorized levy amount.  For example, following the Great Recession, Mercer Island property values have increased significantly, resulting in the City’s levy rate (per $1,000 AV) decreasing from $1.44 in 2013 to $1.00 in 2018.

See also a Seattle Times article (18 March 2018) on the state's complex property tax system and recent increases.