K-12 Tax & Spending Climate: The Assessment Gap: Racial Inequalities in Property Taxation

Carlos Avenancio-Leo ́n and Troup Howard:

We use panel data covering 118 million homes in the United States, merged with geolocation detail for 75,000 taxing entities, to document a nationwide “assessment gap” which leads local governments to place a disproportionate fiscal burden on racial and ethnic minorities. We show that holding jurisdictions and property tax rates fixed, black and Hispanic residents nonetheless face a 10–13% higher tax burden for the same bundle of public services. This assessment gap arises through two channels. First, property assessments are less sensitive to neighborhood attributes than market prices are. This generates racially correlated spatial variation in tax burden within jurisdiction. Second, appeals behavior and appeals outcomes differ by race. This results in higher assessment growth rates for minority residents. We propose an alternate approach for constructing assessments based on small-geography home price indexes, and show that this reduces inequality by at least 55–70%.

Madison’s taxpayer supported K-12 school district has for decades raised property taxes via annual increases and referendums.

1. 4K-12 enrollment: -1.6% (decrease) from 2014-15 to projected 2020-21

2. Total district staffing FTE: -2.9% (decrease) from 2014-15 to proposed 2020-21

3. Total expenditures (excluding construction fund): +17.0% (increase) from 2014-15 to proposed 2020-21

4. Total expenditures per pupil: +19.0% (increase) from 2014-15 to proposed 2020-21

5. CPI change: +10.0% (increase) from January 2014 to January 2020

Andrew Van Dam: Unfair property assessments lead to widespread overtaxation of black Americans’ homes: African Americans have long said they bear a disproportionate burden for taxes that support local police, schools and parks, but nationwide measures of this type of systemic racism are hard to come by.

To expose the structural and historical factors behind these discriminatory property tax assessments, the economists analyzed more than a decade of tax assessment and sales data for 118 million homes throughout the country.

In almost every state, property tax assessments were higher in areas with more black and Hispanic residents. In city after city, the authors show it is not just differences in the buildings or land but also the racial composition of the neighborhood that matters. The gap between white families and minority households remains large — 10 percent — when you combine data for Hispanic and black families.