What type of tax is classified as an ad valorem tax?

An ad valorem tax is specifically defined as a tax based on the assessed value of an item, most commonly real estate. This type of tax directly correlates to the value of the property; the greater the value of the property, the higher the tax owed. This system of taxation is grounded in the principle that property owners should pay taxes in proportion to the value of their holdings, making it a fair way to generate revenue for local governments, typically for funding public services such as education, infrastructure, and emergency services.

The other options describe different forms of taxation that do not align with the definition of an ad valorem tax. A flat rate tax refers to a fixed rate applied equally regardless of value, a tax imposed exclusively on income relates to earnings rather than property values, and a tax that varies based on local government needs does not adhere to a standardized valuation method, thus not fitting the ad valorem classification.