Property Tax Web Series

Abstract

The resilience of property tax revenue with respect to economic fluctuations is often seen as a virtue from the perspective of local policymakers seeking to maintain predictable services and employment. We consider the sources of property tax stability and conclude that it derives primarily from a failure to fully adjust assessed values as market values change within a jurisdiction. We consider the implications of sluggish reassessment for homeowners and explain that it can either enhance or reduce vertical inequity in property taxation, depending on whether the jurisdiction is experiencing housing price convergence or divergence. We find that housing price convergence is more common for US counties, but that housing price divergence was prevalent during the Great Recession. During that period, we show that sluggish reassessment likely exacerbated property tax inequity for areas suffering the greatest impacts of the foreclosure crisis.

This paper was presented by Christopher Berry (University of Chicago) on March 1, 2024 as part of the 2023-2024 Syracuse-Chicago Webinar Series on Property Tax Administration and Design. Lei Ding (Federal Reserve Bank of Philadelphia) was the discussant for this presentation.