The Assessment Gap: Racial Inequalities in Property Taxation

85 Pages Posted: 16 Oct 2019 Last revised: 6 Jul 2021

See all articles by Carlos Avenancio-Leon

Carlos Avenancio-Leon

Indiana University - Kelley School of Business

Troup Howard

University of Utah, David Eccles School of Business

Date Written: October 5, 2019

Abstract

We document a nationwide "assessment gap" which leads local governments to place a disproportionate fiscal burden on racial and ethnic minorities. We show that holding taxing jurisdictions and property tax rates fixed, black and Hispanic residents face a 10-13% higher tax burden for the same bundle of public services. We decompose this inequality into between- and within- neighborhood components and find just over half of the inequality arises between neighborhoods. We then present evidence on mechanisms. Property assessments are less sensitive to neighborhood attributes than market prices are. This generates spatial variation in tax burden within jurisdiction, and leads to over-taxation of highly minority communities. We also find appeals behavior and appeals outcomes differ by race. Inequality does not arise from either (i) racial differences in transaction prices or (ii) price-regressivity in assessment ratios stemming from location-neutral features of the housing stock.

Suggested Citation

Avenancio-Leon, Carlos and Howard, Troup, The Assessment Gap: Racial Inequalities in Property Taxation (October 5, 2019). Available at SSRN: https://ssrn.com/abstract=3465010 or http://dx.doi.org/10.2139/ssrn.3465010

Carlos Avenancio-Leon

Indiana University - Kelley School of Business ( email )

1309 East Tenth Street
Indianapolis, IN 47405-1701
United States

Troup Howard (Contact Author)

University of Utah, David Eccles School of Business ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

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