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Tax Base Erosion and Inequity from Michigan’s Assessment Growth Limit

Author

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  • Timothy R. Hodge
  • Mark Skidmore
  • Gary Sands
  • Daniel McMillen

Abstract

We examine the degree to which Michigan’s property value assessment growth cap has eroded the tax base and created substantial differences in effective tax rates among residential properties within the City of Detroit. While the analysis focuses on a specific city with significant tax base erosion challenges, it is relevant to other cities in Michigan and across the nation, particularly in states that impose assessment growth limits. Using quantile regression techniques, we examine how an assessment growth cap alters effective tax rate distributions within and across property value groups. Results show that the cap creates a wide range of effective tax rates across properties of similar value (horizontal inequity) and similar tax payments for properties of differing values (vertical inequity).

Suggested Citation

  • Timothy R. Hodge & Mark Skidmore & Gary Sands & Daniel McMillen, 2015. "Tax Base Erosion and Inequity from Michigan’s Assessment Growth Limit," Public Finance Review, , vol. 43(5), pages 636-660, September.
    • Handle: RePEc:sae:pubfin:v:43:y:2015:i:5:p:636-660
    DOI: 10.1177/1091142114537675
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    References listed on IDEAS

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    1. Mark Skidmore & Mehmet S. Tosun, 2011. "Property Value Assessment Growth Limits, Tax Base Erosion, and Regional In-Migration," Public Finance Review, , vol. 39(2), pages 256-287, March.
    2. Moshe Buchinsky, 1998. "Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 88-126.
    3. Dye, Richard F. & McGuire, Therese J. & McMillen, Daniel P., 2005. "Are Property Tax Limitations More Binding Over Time?," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(2), pages 215-225, June.
    4. Bowman, John H., 2006. "Property Tax Policy Responses to Rapidly Rising Home Values: District of Columbia, Maryland, and Virginia," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(3), pages 717-733, September.
    5. Skidmore, Mark & Ballard, Charles L. & Hodge, Timothy R., 2010. "Property Value Assessment Growth Limits and Redistribution of Property Tax Payments: Evidence From Michigan," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(3), pages 509-537, September.
    6. Dye, Richard F. & McMillen, Daniel P. & Merriman, David F., 2006. "Illinois' Response to Rising Residential Property Values: An Assessment Growth Cap in Cook County," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(3), pages 707-716, September.
    7. Giertz, J. Fred, 2006. "The Property Tax Bound," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(3), pages 695-705, September.
    8. Skidmore, Mark, 1999. "Tax and Expenditure Limitations and the Fiscal Relationships between State and Local Governments," Public Choice, Springer, vol. 99(1-2), pages 77-102, April.
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    Cited by:

    1. William H. Hoyt & Aaron Yelowitz, 2016. "Anticipated Property Tax Increases and the Timing of Home Sales: Evidence from Administrative Data," CESifo Working Paper Series 6264, CESifo.

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