Assessing Inequalities in Property Taxation by Homeowner Age and Race

• In Event: Political, Social, and Welfare Consequences of Economic Inequality (Co-sponsored by Political Sociology Section)

Abstract

Scholars have speculated that younger and non-White homeowners face higher relative property tax burdens in the US than do older and White homeowners, because they have higher assessment ratios: the ratio of their home’s assessed value (to which property tax rates are applied) to its market value. Previous research examining demographic inequalities in relative property tax burdens has relied on a sample of recently sold properties, thereby not capturing most long-tenured homeowners. These homeowners, who are disproportionately older and White, are likely to have seen the greatest benefits from assessment caps that limit increases in assessed values for incumbent homeowners while allowing assessed values to reset to market values after properties are sold.

We advance on prior work measuring age- and race-based inequalities in property tax burdens, and the effects of assessment caps on these inequalities, by using a nationwide dataset of residential market values that is available for all properties. We use data from consumer reference files to capture the age of homeowners, and estimate racial disparities using a state-of-the-art Bayesian method.

Our preliminary findings from California, which has had an assessment cap since the passage of Proposition 13 in 1978, indicate stark age-based gaps in assessment ratios, much of which can be attributed to the effects of Proposition 13. We estimate that homeowners over 70 saved an average of $3,290 in property taxes in 2019 due to Proposition 13, compared to an average of $742 for homeowners under 45. We also estimate that Proposition 13 has disproportionately benefited White over non-White homeowners, though these gaps are smaller and there is substantial between-racial-group variation in benefits received among non-White homeowners.

Authors

• Joe LaBriola, University of Michigan-Ann Arbor

• Robert Allen Manduca, University of Michigan-Ann Arbor

• Pablo A. Mitnik, University of Michigan-Ann Arbor