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Identifying Determinants of Horizontal Property Tax Inequity: Evidence from Florida

Author

Listed:
  • Marcus T. Allen

    (Florida Atlantic University, Fort Lauderdale, FL 33314)

  • William H. Dare

    (Oklahoma State University, Tulsa, OK 74106)

Abstract

In the property tax literature, an ad valorem property tax is considered equitable if all properties in the taxing jurisdiction are subject to the same effective tax rate. That is, all properties, regardless of value or type, should be taxed at the same percentage of their market value. Because market value is a theoretical construct and not directly observable, errors in estimating market value may result in systematic inequity, with some properties taxed at higher effective rates than others. This study extends previous research on property tax inequity by examining potential determinants of errors in the property valuation process for a sample of single-family homes in Palm Beach County, Florida. The results indicate that assessment difficulty (as measured by the variation around the mean assessment to transaction price ratio) is positively related to lot size, living area, age of the home and the percentage of minority residents in the neighborhood and is negatively related to market activity levels, resident income levels, whether the property is the permanent residence of its owner, and whether the property has a swimming pool. The generality of these results is limited by the use of transaction price as a proxy for unobservable market value.

Suggested Citation

  • Marcus T. Allen & William H. Dare, 2002. "Identifying Determinants of Horizontal Property Tax Inequity: Evidence from Florida," Journal of Real Estate Research, American Real Estate Society, vol. 24(2), pages 153-164.
    • Handle: RePEc:jre:issued:v:24:n:2:2002:p:153-164
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    Citations

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    Cited by:

    1. Mayor, Karen & Lyons, Seán & Tol, Richard S. J., 2010. "Designing a property tax without property values: Analysis in the case of Ireland," Papers WP352, Economic and Social Research Institute (ESRI).
    2. Mary Beal & Mary O. Borg & Harriet Stranahan, 2017. "The Equity Effects of Property Tax Caps: Evidence from Florida," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 6, July.
    3. Seth B. Payton, 2012. "The Impact of Property Assessment Standards on Property Tax Burden," Public Finance Review, , vol. 40(5), pages 584-613, September.
    4. Brent C Smith, 2008. "Intrajurisdictional Segmentation of Property Tax Burdens: Neighborhood Inequities Across an Urban Sphere," Journal of Real Estate Research, American Real Estate Society, vol. 30(2), pages 207-224.
    5. Gary C. Cornia & Barrett A. Slade, 2005. "Property Taxation of Multifamily Housing: An Empirical Analysis of Vertical and Horizontal Equity and Assessment Methods," Journal of Real Estate Research, American Real Estate Society, vol. 27(1), pages 17-46.
    6. Rachel N. Weber & Daniel P. McMillen, 2010. "Ask and Ye Shall Receive? Predicting the Successful Appeal of Property Tax Assessments," Public Finance Review, , vol. 38(1), pages 74-101, January.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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