Why are Residential Property Tax Rates Regressive?

61 Pages Posted: 23 Nov 2020 Last revised: 21 Sep 2021

Date Written: November 12, 2020


Among single-family homes that enjoy the same set of property tax-funded amenities and pay the same statutory property tax rate, owners of cheap houses pay almost 50% higher effective tax rates than owners of expensive houses. This pattern appears throughout the United States and is caused by systematic assessment regressivity -- cheap houses are over-appraised relative to expensive houses. Fourteen percent of the observed regressivity can be explained by tax assessors' flawed valuation methods that ignore variation in priced house and neighborhood characteristics. Infrequent reappraisal can explain less than 10% of the regressivity. Data from Cook County suggests that heterogeneous appeals behaviors and outcomes do not contribute. Taken at face value, correcting assessment regressivity would increase poor homeowners' net worth by almost 15%.

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 Bank of Philadelphia ( email )

Philadelphia, PA
United States

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