Assessor Incentives and Property Assessment

Abstract

While typically not a formulator of policy, property assessors are likely sensitive to political incentives as they are either directly elected to their office or appointed by another elected official. This paper estimates a model that is motivated by the assumption that assessors seek to maximize political support in a manner that effects the assessment-to-sales price ratio. Using panel data from a 2001 to 2006 series of sales price ratio studies in Virginia cities and counties, a fixed effects variance decomposition regression reveals a variety of socioeconomic and political variables that bias the assessed value away from fair market value. In addition to finding influential socioeconomic factors, the results indicate that elected assessors underassess more than appointed assessors. Furthermore, it appears assessors try to export the property tax onto commercial property via higher assessments, and assessors in districts with higher measures of local government fiscal stress tend to give higher assessments.

Keywords: Property Tax Assessment, Assessor Type, Sales Ratio

JEL Classification: H71, H73, H83