Intrajurisdictional Segmentation of Property Tax Burdens: Neighborhood Inequities Across an Urban Sphere

Abstract

This study extends the academic literature on vertical inequities in real property taxation by analyzing within jurisdictional variations in the property tax burden on residents of Chicago, Illinois. A two-stage model with an instrumental variable identifies tax burden variations between neighborhoods in a single metropolitan tax jurisdiction. A second model incorporates neighborhood and property characteristics in an examination of variations in the ratio of property tax to market value. The findings are important to policymakers interested in funding urban redevelopment programs targeting wealth building through real estate ownership in low-income neighborhoods. The evidence is equally important to analysts concerned with market segmentation and the implications of property tax variations on real estate markets.

Keywords: property taxation, tax burden, Chicago, property charateristic