What does "Ad Valorem tax" mean?

Ad Valorem tax refers to a tax that is levied based on the value of the property. This type of taxation is commonly used for property taxes, where the amount owed is calculated by assessing the current value of a property. The idea behind Ad Valorem tax is that those who own more valuable properties should contribute more towards public services and local infrastructure, as they have greater capacity to pay.

The valuation typically considers various factors such as the property's location, size, condition, and market conditions at the time of assessment. The tax rate is usually expressed as a percentage of the total assessed value, making it a fair system for determining taxation. This mechanism is widely adopted by local governments to fund essential services, including education, law enforcement, and public health initiatives.