Reassessing the Property Tax

58 Pages Posted: 9 Mar 2021

See all articles by Christopher R. Berry

Christopher R. Berry

University of Chicago - Harris School of Public Policy

Date Written: March 9, 2021

Abstract

The property tax is the single largest source of revenue for American local governments. It is designed to be an ad valorem tax. The fairness and accuracy of the tax hinges on the quality of property valuation by local assessors. Using data from millions of residential real estate transactions, this paper shows that assessments are typically regressive, with low-priced properties being assessed at a higher value, relative to their actual sale price, than are high-priced properties. Within a jurisdiction, homes in the bottom decile of sale price face an assessment level, as a proportion of price, that is twice as high as that faced by homes in the top decile, on average. As a result, the property tax disproportionately burdens owners of less valuable homes. Such regressivity is evident throughout the US. This result cannot be explained by measurement error in sale prices, or by explicit policy choices, such as assessment limits. Rather, regressivity appears to result from limitations in the data and methods used in assessment.

Keywords: property tax, inequality

JEL Classification: H71 R3

Suggested Citation

Berry, Christopher R., Reassessing the Property Tax (March 9, 2021). Available at SSRN: https://ssrn.com/abstract=3800536 or http://dx.doi.org/10.2139/ssrn.3800536

Christopher R. Berry (Contact Author)

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States

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