A new study by Christopher Berry, the William J. and Alicia Townsend Friedman Professor at the Harris School of Public Policy at the University of Chicago, finds that low-income families face far higher property tax rates than high-income families. The reason is differences in assessment rates between low-income and high-income neighborhoods. Professor Berry found that assessment levels are significantly higher for properties located in Census tracts with lower median housing values, lower income and education, and higher proportions of African Americans.
The study found that a property valued in the bottom 10 percent within a particular jurisdiction, pays an effective tax rate that is, on average, more than double that paid by a property in the top 10 percent. Properties located in neighborhoods that are 90 to 100 percent Black experience assessment levels that are more than 1.5 times the average for their county.
Professor Berry explains that “the property tax is the single largest source of revenue for American local governments. 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 research 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.”
The unfairness in property assessment rates means that on a nationwide basis, the lowest-income homeowners effectively subsidize the tax bills of their higher-income counterparts, fueling inequities across racial, economic, housing, and other divides.
The full study, “Reassessing the Property Tax,” may be downloaded here.