Property Tax Limitation and Racial Inequality in Effective Tax Rates

Abstract

In the late 20th century, two thirds of American states enacted policies to limit the growth of local property tax revenues. We examine the effects of property tax limitations on the effective property tax rates reported by homeowners of different racial and ethnic groups in the United States. We find that property tax limitations reduce the effective property tax rates of homeowners regardless of their race and ethnicity, but that most forms of property tax limitation exacerbate racial inequality, providing the greatest reduction in effective tax rates to white homeowners. In the aggregate, these inequalities result in substantially unequal tax savings that might not survive democratic scrutiny if they were distributed as direct subsidies. This inequality may be especially problematic insofar as tax privileges for property owners effectively disguise a public benefit as a private property right.

Not One but Many: Monetary Punishment and the Fergusons of America,

“…Its heavy reliance on fines and fees was set in motion years earlier by antibusing‐turned‐antitax movements that would pass a tax limitation provision in 1980, otherwise known as the Hancock Amendment (Henricks and Seamster ). Similar to laws that proliferated the nation during the late 1970s and early 1980s (Martin ; Martin and Beck ), the statewide amendment in Missouri placed a levy limitation on property taxes. This effectively capped what rates property taxes could be increased at the local level, setting forth procedural barriers for how policymakers could go about generating money.…”

Gentrification, Property Tax Limitation, and Displacement

“…Why not? One possible reason is that the places where effective property tax rates are highest tend to be segregated Black communities (Martin and Beck 2016), which are precisely the communities that are least likely to be targets of new investment by affluent homebuyers (Hwang and Sampson 2014;McKinnish, Walsh, and White 2011). Another possible reason is that the administration of the property tax can introduce substantial slippage between the market value of a home and the assessed value recorded for tax purposes.…”

The Longitudinal Revolution: Sociological Research at the 50-Year Milestone of the Panel Study of Income Dynamics

“…In particular the lower housing prices in neighborhoods with high minority concentration (Harris 1999) may explain why minority household accumulate less home equity and derive less equity return from their earnings and marital status (Parcel 1982). Furthermore, in a more hidden way, unequal tax benefits disadvantage minority households as white homeowners disproportionally benefit from property tax limitations (Martin and Beck 2015). Besides racial differences in returns to home ownership, home ownership itself is of course also marked by continued and stark racial inequality (Hirschl and Rank 2010; Rank 2009).…”