Assessment Regressivity and Property Taxation

Homestead exemptions typically produce a moderately progressive statutory incidence for the property tax in the US when progressivity is measured using the ratio of a household’s tax to the sale price of a home. However, the tax is levied on the assessed value of a home rather than the sale. A stylized fact from the assessment literature is that assessment rates tend be lower for higher-priced home. In this paper, we first document the pattern of assessment regressivity. Next, we show that this pattern of regressivity is capable of reversing the statutory progressivity incidence of the property tax, particularly for low-priced homes. We then use HMDA data to show that this pattern of assessment regressivity also leads to regressivity when measured as the ratio of taxes to household income.