Assessment Frequency and Equity of the Real Property Tax: Latest Evidence from Philadelphia

47 Pages Posted: 10 Dec 2021 Last revised: 21 Dec 2021

See all articles by Yilin Hou

Yilin Hou

Syracuse University - Maxwell School of Citizenship and Public Affairs

Lei Ding

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

David Schwegman

American University

Alaina Barca

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Date Written: December, 2021

Abstract

Philadelphia’s Actual Value Initiative, adopted in 2013, creates a unique opportunity for us to test whether reassessments at short intervals to true market value and taxing by such values improve equity. Based on a difference-in-differences framework using parcel-level data matched with transactions in Philadelphia and 15 comparable cities, this study finds positive evidence on equity outcomes from more regular revaluations. The quality of assessment, as measured by the coefficient of dispersion, improves substantially after 2014, although the extent of improvement varies across communities. Vertical equity, measured by price related differential, also improved, although it was still above the standard threshold. Cross-city comparisons confirm Philadelphia’s improvement in quality and equity of assessments after adopting the initiative. These results highlight the importance of regular reassessment in places where property values increase quickly, and they shed light on the disparate impacts of reassessment across income, property value, race, and gentrification status. The paper makes the case that the property tax, if designed well, can be an equitable tax instrument.

Keywords: real property tax, valuation, assessment cycle, equity

JEL Classification: H20, H31, H71, R51

Suggested Citation

Hou, Yilin and Ding, Lei and Schwegman, David and Barca, Alaina, Assessment Frequency and Equity of the Real Property Tax: Latest Evidence from Philadelphia (December, 2021). FRB of Philadelphia Working Paper No. 21-43, Available at SSRN: https://ssrn.com/abstract=3981221 or http://dx.doi.org/10.21799/frbp.wp.2021.43

Yilin Hou

Syracuse University - Maxwell School of Citizenship and Public Affairs ( email )

400 Eggers Hall
Syracuse, NY 13244
United States

Lei Ding (Contact Author)

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

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

David Schwegman

American University

Alaina Barca

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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