Why are Residential Property Tax Rates Regressive?

78 Pages Posted: 23 Nov 2020 Last revised: 19 Apr 2024

See all articles by Natee Amornsiripanitch

Natee Amornsiripanitch

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Date Written: November 12, 2020

Abstract

Among owner-occupied single-family homes in the United States that enjoy the same set of property tax-funded amenities and pay the same statutory property tax rate, owners of inexpensive houses pay almost 50% higher effective tax rates than owners of expensive houses because tax assessments are regressive with respect to house price. Using a near-national data set, I provide empirical evidence that assessment regressivity is partially caused by valuation methods that do not fully incorporate important pricing information such as neighborhood characteristics. Systematic sorting across neighborhoods implies that economically disadvantaged households disproportionately bear the cost of this valuation problem. The findings potentially have important implications for wealth inequality and other forms of ad valorem tax.

Keywords: Property Tax, Assessment Regressivity, Wealth Inequality

JEL Classification: H2, R00, G00

Suggested Citation

Amornsiripanitch, Natee, Why are Residential Property Tax Rates Regressive? (November 12, 2020). Available at SSRN: https://ssrn.com/abstract=3729072 or http://dx.doi.org/10.2139/ssrn.3729072

Natee Amornsiripanitch (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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