A Third Dimension of Equity: Temporal Discontinuities in Property Assessments

Abstract

The cycle of property revaluation in a municipality inevitably creates tax bill discontinuities for individual property owners, as market values change. However, any form of statistical analysis carries a risk that analyst assumptions will color the results. Data from Providence, Rhode Island suggest that standard assessment techniques frequently produce onerous tax bill discontinuities, not because of shifts in market values, but because of the techniques in use and the assumptions behind them. Large numbers of tax bill discontinuities are not reliably associated with rapid changes in property value, with highly variable property values, or with property value, even if the last is common. The random nature of these discontinuities are particularly onerous for renters and for households at the low end of the income spectrum. Because these effects are statistical artifacts and not inherent in the real estate market, they permit some degree of amelioration. A case is presented that current assessment techniques emphasize an elusive standard of accuracy over stability, and suggest a greater focus on temporal consistency as an indispensable component of fairness.

Keywords: property tax, property assessment, tax fairness

JEL Classification: H22, H20