Suppose that you live in a house with a market and taxable value of $100,000 in a community with a property tax rate of $30 per $1,000 of taxable value.

(a) What is your property tax amount?

(b) What happens to your property tax bill if the market value of your property rises by 10 percent, and the assessment ratio is kept constant? What if the tax rate were increased by 10 percent along with the value?

(c) Suppose your community allows an exemption of the first $20,000 of taxable value.
How much would the exemption reduce your property tax bill? What happens to your tax savings from the exemption as value increases? As the tax rate increases?

(d) Suppose instead of the exemption that you are allowed a credit equal to one‑half the amount of property tax that is greater than 5 percent of your income. If your annual income is $40,000, how much does the credit reduce your property tax? What happens to your tax savings from the credit as value increases? As the tax rate increases?