Sunday, January 23, 2011

Is the Assessment Process Progressive or Regressive?

That is a question* that has been asked a lot by public finance scholars. My latest paper, forthcoming at Land Economics, argues that it is the wrong question and that we should instead ask what might cause it to be one or the other, rather than thinking about the process as being inherently one-sided. For those interested in the property tax incidence debate, one must be careful about how political opportunism might be submitted as evidence in favor of either side, but more on that to come from me in the future. The abstract:
The previous literature on vertical equity in property assessment has focused on parcel level data within a single area, and has produced mixed conclusions on whether the process is progressive or regressive. This paper advances the discussion to identifying what differences between jurisdictions might account for the mix of findings. Using data from Virginia cities and counties between 2001 and 2007, evidence is presented that indicates having tax maps available online, appointed assessors, and senior citizens all influence the level of regressivity observed between jurisdictions. Overall, the results support the hypothesis that interjurisdictional differences are determinants of vertical inequity.
*The assessment process would be equitable across property classes if they all get the same rate of fractional assessment. For example, if all properties were assessed at 80% of true market value, then this would be vertically equitable despite being inaccurate. If the more expensive properties were only assessed at 70% of true market value, while the low-value property was assessed at a rate of 90%, then we would call this a "regressive" process.

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