Tax dollars help support the functions and services of specific local organizations. The local taxing authority (e.g. the county or municipal government) uses one of two methods to calculate the tax rate:

1. In the first method, the taxing authority estimates its total expenditures over a given time period. Then, it divides that figure by the taxable or assessed value of all property within its jurisdiction. The result is the tax rate. This rate is sometimes expressed using mills or percentages; sometimes it is expressed as a dollar amount ($1 per $100).
2. In the second method, the taxing authority estimates the amount of taxes available from property tax levied at a specific rate. The taxing authority will either increase or decrease its budget based on increases or decreases in the total value of the property’s taxable or assessed value.

State constitutions or statutes commonly impose rate limitations. Many states set a maximum rate for each class of government (e.g., school, city, or county). Because real property can be located in overlapping tax districts (e.g. schools and towns), the total tax rates will vary from one neighborhood to another. This results in more than one local taxing authority calculating tax rates for the property. Many jurisdictions aggregate these rates, resulting in a single tax levy called a consolidated, overall, or composite levy.