The Assessment Gap: Racial Inequalities in Property Taxation
57 Pages Posted: 16 Oct 2019 Last revised: 21 Dec 2021
Date Written: October 5, 2019
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) differences in features of the housing stock.
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