Differential Property Taxation in a Metropolitan Area

Zimmer, Basil G.

doi:10.1086/ntj41790735

Cited by 2 publications

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“…Thin markets and spatial spillover effects may also amplify vertical inequity (Smith 2000; McMillen and Weber 2008). Studies of vertical equity of the property tax document a systematic assessment bias in inner cities and metropolitan areas as compared to suburbs; recent foreclosures appear to have a modest effect on vertical equity (Johnson 1958; Zimmer 1958; Oldman and Aaron 1965; Black 1972; Walzer and Fisher 1981; Strauss and Strauss 2003 and 2004; McMillen 2011; Payton 2012a).…”

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confidence: 99%

Housing Crisis and Vertical Equity of the Property Tax in a Market Value–based Assessment System

Krupa

2013

Public Finance Review

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Market value–based assessment systems introduce objectivity and transparency into the assessment process by partially removing assessors’ bias while benchmarking assessed values against the recently sold properties. This article explores vertical equity of Indiana’s new market value–based assessment system over a decade of 2000s including the years of the housing crisis (2008–2010). Five methods are used to assess vertical equity of the system, including locally weighted and quantile regressions. The results demonstrate a significant increase in vertical inequity during the years of the housing crisis. Assessment regressivity is particularly acute at the tails of the ratio distribution: the least expensive properties are overassessed, while the most expensive ones are underassessed. While a self-regulating assessment system is yet to be discovered, I recommend reducing the time intervals between mass reassessments and introducing independent audits for properties that are most susceptible to overassessment and underassessment to remedy vertical inequity of the property tax.

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Section: Review Of Relevant Literaturementioning

confidence: 99%

Housing Crisis and Vertical Equity of the Property Tax in a Market Value–based Assessment System

Krupa

2013

Public Finance Review

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Social and Geographic Inequities in the Residential Property Tax: A Review and Case Study

Harris

Lehman

2001

Environ Plan A

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Although the fact is not widely acknowledged by urban scholars, because of the way that it is administered the property tax helps to shape the social geography of metropolitan areas. Research by public finance specialists has shown that cheap housing is often overassessed, and that variations in assessment ratios (the ratio of assessed to market values) usually favour the suburbs. Sales prices and assessment data from the Hamilton, Ontario, metropolitan area for 1976, 1996, and 1999 confirm these patterns and show that they are persistent. In addition, cross-tabulations by market value and location show that geographical variations in assessment ratios are caused by the inequitable treatment of inexpensive property, not vice versa. A 1998 reassessment made the situation worse. The main difficulty in reducing tax inequities is political, not technical.

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Differential Property Taxation in a Metropolitan Area

Cited by 2 publications

References 0 publications

Housing Crisis and Vertical Equity of the Property Tax in a Market Value–based Assessment System

Housing Crisis and Vertical Equity of the Property Tax in a Market Value–based Assessment System

Social and Geographic Inequities in the Residential Property Tax: A Review and Case Study

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