What is an ad valorem tax and how does it apply to real estate?

An ad valorem tax is a tax based on the assessed value of property, from the Latin phrase meaning "according to value." Property taxes are the most common form of ad valorem tax in real estate. The tax amount increases as the property value increases, making it proportional rather than flat. Ad valorem taxes provide the primary funding mechanism for local governments, school districts, and special taxing districts. They differ from specific taxes, which are fixed amounts regardless of value, and from income taxes, which are based on earnings. ---