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The Assessment Gap: Racial Inequalities in Property Taxation

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  • Carlos F Avenancio-León
  • Troup Howard

Abstract

We document a nationwide “assessment gap” that leads local governments to place a disproportionate fiscal burden on racial and ethnic minorities. We show that holding taxing jurisdictions and property tax rates fixed, Black and Hispanic residents face a 10%–13% higher tax burden for the same bundle of public services. We decompose this disparity into between- and within-neighborhood components and find that just over half of it arises between neighborhoods. We then present evidence on mechanisms. Property assessments are less sensitive to neighborhood attributes than market prices are. This generates spatial variation in tax burden within jurisdiction and leads to overtaxation of communities with a high share of minority residents. We also find appeals behavior and appeals outcomes differ by race within neighborhood. Inequality does not arise from (i) racial differences in transaction prices or (ii) differences in features of the housing stock.

Suggested Citation

  • Carlos F Avenancio-León & Troup Howard, 2022. "The Assessment Gap: Racial Inequalities in Property Taxation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(3), pages 1383-1434.
    • Handle: RePEc:oup:qjecon:v:137:y:2022:i:3:p:1383-1434.
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    File URL: http://hdl.handle.net/10.1093/qje/qjac009
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    Cited by:

    1. Bigelow, Daniel P. & Kuethe, Todd, 2023. "The impact of preferential farmland taxation on local public finances," Regional Science and Urban Economics, Elsevier, vol. 98(C).
    2. Benjamin Lu & Jia Wan & Derek Ouyang & Jacob Goldin & Daniel E. Ho, 2024. "Quantifying the Uncertainty of Imputed Demographic Disparity Estimates: The Dual Bootstrap," NBER Chapters, in: Race, Ethnicity, and Economic Statistics for the 21st Century, National Bureau of Economic Research, Inc.
    3. Francis Wong, 2024. "Taxing Homeowners Who Won’t Borrow," CESifo Working Paper Series 11185, CESifo.

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