IDEAS home Printed from https://ideas.repec.org/p/tsa/wpaper/0011eco.html
   My bibliography  Save this paper

Residential Property Taxation: Is Periodic Reassessment worth it?

Author

Listed:
  • John Merrifield

    (The University of Texas at San Antonio)

  • Yong Bao

    (The University of Texas at San Antonio)

Abstract

Most of the states that tax residential property determine the tax base through a periodic reassessment (PR) of properties based on sales of comparable properties. Two states replaced the PR approach with assessment based on acquisition value (AV = purchase price) with an annual inflation adjustment. Many others continue to periodically reassess, but have directly or indirectly set low caps on the growth rate of taxable value. The research tested the null hypothesis that the PR approach yields no more taxable residential value than an AV approach, which costs less to administer and eliminates the threat that rising property values could evict someone from their home. The econometric analysis of an unbalanced panel from 31 states pver the period 1979-2005 yielded mixed results. Consisten with conventional wisdom, terminating PR in favor of an AV approach can have a significant short-run impact. But the short-rum finding is not robust. It is driven by the data for Oregon, and disappears or weakens significantly if the Oregon data are adjusted for for Oregon's late-90's assessment rollback. Consistent with the presence of long-term offsetting factors, subsituting AV for PR has a smaller or zero effect on taxable residential property value in the long-run. The regressions omitting Oregon failed to reject the null hypothesis that assessment based on PR does not yield significantly more taxable value than an AV approach, or approximations of an AV approach through a cap on assessed value growth.

Suggested Citation

  • John Merrifield & Yong Bao, 2007. "Residential Property Taxation: Is Periodic Reassessment worth it?," Working Papers 0003, College of Business, University of Texas at San Antonio.
    • Handle: RePEc:tsa:wpaper:0011eco
    as

    Download full text from publisher

    File URL: http://interim.business.utsa.edu/wps/eco/0003ECO-091-2007.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Earl D. Benson & Arthur L. Schwartz, Jr., 1997. "Vertical Equity in the Taxation of Single Family Homes," Journal of Real Estate Research, American Real Estate Society, vol. 14(3), pages 215-232.
    2. Eric A. Hanushek (ed.), 2003. "The Economics of Schooling and School Quality," Books, Edward Elgar Publishing, volume 0, number 2561.
    3. Swamy, P A V B & Arora, S S, 1972. "The Exact Finite Sample Properties of the Estimators of Coefficients in the Error Components Regression Models," Econometrica, Econometric Society, vol. 40(2), pages 261-275, March.
    4. Strumpf, Koleman S., 1999. "Infrequent Assessments Distort Property Taxes: Theory and Evidence," Journal of Urban Economics, Elsevier, vol. 46(2), pages 169-199, September.
    5. Wallace, T D & Hussain, Ashiq, 1969. "The Use of Error Components Models in Combining Cross Section with Time Series Data," Econometrica, Econometric Society, vol. 37(1), pages 55-72, January.
    6. Mehta, Shekhar & Giertz, J. Fred, 1996. "Measuring the Performance of the Property Tax Assessment Process," National Tax Journal, National Tax Association, vol. 49(1), pages 73-85, March.
    7. O'Sullivan,Arthur & Sexton,Terri A. & Sheffrin,Steven M., 2007. "Property Taxes and Tax Revolts," Cambridge Books, Cambridge University Press, number 9780521035996, September.
    8. Wansbeek, Tom & Kapteyn, Arie, 1989. "Estimation of the error-components model with incomplete panels," Journal of Econometrics, Elsevier, vol. 41(3), pages 341-361, July.
    9. Ladd, Helen F. & Bradbury, Katharine L., 1988. "City Taxes and Property Tax Bases," National Tax Journal, National Tax Association, vol. 41(4), pages 503-23, December.
    10. Fuller, Wayne A. & Battese, George E., 1974. "Estimation of linear models with crossed-error structure," Journal of Econometrics, Elsevier, vol. 2(1), pages 67-78, May.
    11. Fischel, William A., 1989. "Did Serrano Cause Proposition 13?," National Tax Journal, National Tax Association, vol. 42(4), pages 465-73, December.
    12. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-971, Nov./Dec..
    13. Fischel, William A., 1989. "Did Serrano Cause Proposition 13?," National Tax Journal, National Tax Association;National Tax Journal, vol. 42(4), pages 465-473, December.
    14. Ladd, Helen F. & Bradbury, Katharine L., 1988. "City Taxes and Property Tax Bases," National Tax Journal, National Tax Association;National Tax Journal, vol. 41(4), pages 503-523, December.
    15. Mehta, Shekhar & Giertz, J. Fred, 1996. "Measuring the Performance of the Property Tax Assessment Process," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(1), pages 73-85, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hamid Beladi & Nicholas S. P. Tay & Reza Oladi, 2011. "On Competition for Listings," Working Papers 0003, College of Business, University of Texas at San Antonio.
    2. Eric J. Brunner & Jon Sonstelie, 2006. "California's School Finance Reform: An Experiment in Fiscal Federalism," Working papers 2006-09, University of Connecticut, Department of Economics.
    3. Calabrese, Stephen, 2024. "Household mobility and the political economy and welfare effects of local tax limits," Journal of Urban Economics, Elsevier, vol. 142(C).
    4. Badi H. Baltagi, 1987. "On Estimating from a More General Time-Series Cum Cross-Section Data Structure," The American Economist, Sage Publications, vol. 31(2), pages 69-71, October.
    5. Subhash C. Sharma & Anil K. Bera, 2021. "Estimation of Random Components and Prediction in One and Two-Way Error Component Regression Models," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(1), pages 419-441, December.
    6. Lang, Kevin & Jian, Tianlun, 2004. "Property taxes and property values: evidence from Proposition," Journal of Urban Economics, Elsevier, vol. 55(3), pages 439-457, May.
    7. Thomas A. Downes, 2002. "Do state governments matter?: a review of the evidence on the impact on educational outcomes of the changing role of the states in the financing of public education," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 47(Jun), pages 143-180.
    8. Stephanie Riegg Cellini & Fernando Ferreira & Jesse Rothstein, 2008. "The Value of School Facilities: Evidence from a Dynamic Regression Discontinuity Design," NBER Working Papers 14516, National Bureau of Economic Research, Inc.
    9. Stephen Calabrese & Dennis Epple, 2010. "On the political economy of tax limits," Working Papers 2010/14, Institut d'Economia de Barcelona (IEB).
    10. Robert F. Phillips, 2012. "On computing generalized least squares and maximum-likelihood estimates of error-components models with incomplete panels and correlated disturbances," Economics Bulletin, AccessEcon, vol. 32(4), pages 3017-3024.
    11. repec:pri:cepsud:180rothstein is not listed on IDEAS
    12. Geoffrey Propheter, 2014. "Assessment Administration and Performance during the Great Recession," Public Finance Review, , vol. 42(5), pages 662-685, September.
    13. Fischel, William A., 2001. "Homevoters, Municipal Corporate Governance, and the Benefit View of the Property Tax," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 157-74, March.
    14. Byron F. Lutz, 2009. "Fiscal amenities, school finance reform and the supply side of the Tiebout market," Finance and Economics Discussion Series 2009-18, Board of Governors of the Federal Reserve System (U.S.).
    15. Marius C. O. Amba, 2021. "Simultaneous Equations with Three Way Error Components," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(3), pages 583-596, September.
    16. Malekzadeh, Ahad & Esmaeli-Ayan, Asghar, 2021. "An exact method for testing equality of several groups in panel data models," Statistics & Probability Letters, Elsevier, vol. 177(C).
    17. Stephanie Riegg Cellini & Fernando Ferreira & Jesse Rothstein, 2008. "The Value of School Facilities: Evidence from a Dynamic Regression Discontinuity Design," NBER Working Papers 14516, National Bureau of Economic Research, Inc.
    18. Laura Magazzini & Giorgio Calzolari, 2010. "Negative variance estimates in panel data models," Working Papers 15/2010, University of Verona, Department of Economics.
    19. Stephen Calabrese & Dennis Epple, 2010. "On the political economy of tax limits," Working Papers 2010/14, Institut d'Economia de Barcelona (IEB).
    20. Davis, Peter, 2002. "Estimating multi-way error components models with unbalanced data structures," Journal of Econometrics, Elsevier, vol. 106(1), pages 67-95, January.
    21. Thomas A. Husted & Lawrence W. Kenny, 2007. "Explanations for States Adopting Limits on Educational Spending," Public Finance Review, , vol. 35(5), pages 586-605, September.

    More about this item

    Keywords

    Periodic reassessment; acquisition value; residential property tax;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tsa:wpaper:0011eco. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wendy Frost (email available below). General contact details of provider: https://edirc.repec.org/data/cbutsus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.