Tax Base Erosion and Inequity from Michigan's Assessment Growth Limit: The Case of Detroit

43 Pages Posted: 12 Feb 2013

See all articles by Timothy R. Hodge

Timothy R. Hodge

Michigan State University - Department of Agricultural, Food and Resource Economics

Mark Skidmore

Michigan State University - Department of Agricultural Economics

Gary Sands

Wayne State University - College of Urban, Labor, & Metropolitan Affairs

Daniel McMillen

University of Illinois at Urbana-Champaign - Department of Economics

Date Written: January 31, 2013

Abstract

In this paper we examine the degree to which Michigan’s property value assessment growth cap has eroded the tax base and created substantial differences in effective tax rates among residential properties within the City of Detroit. While the analysis focuses on a specific city with significant tax base erosion challenges, it is relevant to other cities in Michigan and across the nation, particularly in states that impose assessment growth limits. Using quantile regression techniques, we examine how an assessment growth cap alters effective tax rate distributions within and across property value groups. Results show that the cap creates a wide range of effective tax rates across properties of similar value (horizontal inequity), and similar tax payments for properties of differing values (vertical inequity).

Keywords: property tax, assessment growth limit, equity, quantile regression

JEL Classification: H710

Suggested Citation

Hodge, Timothy R. and Skidmore, Mark L. and Sands, Gary and McMillen, Daniel, Tax Base Erosion and Inequity from Michigan's Assessment Growth Limit: The Case of Detroit (January 31, 2013). CESifo Working Paper Series No. 4098, Available at SSRN: https://ssrn.com/abstract=2214907

Timothy R. Hodge

Michigan State University - Department of Agricultural, Food and Resource Economics ( email )

MI
United States

Mark L. Skidmore (Contact Author)

Michigan State University - Department of Agricultural Economics ( email )

East Lansing, MI 48824
United States

Gary Sands

Wayne State University - College of Urban, Labor, & Metropolitan Affairs ( email )

Detroit, MI 48202
United States

Daniel McMillen

University of Illinois at Urbana-Champaign - Department of Economics ( email )

410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States

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