Which type of tax is classified as ad valorem?

Ad valorem taxes are based on the assessed value of an asset, most commonly real estate. The term "ad valorem" itself translates to "according to value" in Latin. This type of tax is applied during the assessment of property values, whereby the amount owed is proportional to the value of the property in question.

General real estate tax, often referred to as property tax, is a primary example of an ad valorem tax. Local governments typically levy this tax to fund various public services, such as schools, infrastructure, and emergency services. Each property is assessed periodically, and taxes are calculated based on the assessed value, making it a quintessential ad valorem tax.

The other types of taxes mentioned do not fit the ad valorem classification. Sales tax, for instance, is a transactional tax that is calculated on the cost of goods or services sold, regardless of the asset's value over time. Income tax is based on earnings and is not linked to the value of any asset. Excise tax, on the other hand, is a specific tax applied to certain goods, services, or activities, usually set at a fixed rate per unit rather than linked to value.