For 100 Years, Low-Income Americans Overpay on Property Taxes, While the Richest Underpay

(Source: Unsplash/Adam Nir.)

“In this world nothing is certain but death and taxes,” Benjamin Franklin famously wrote in 1789. Another certainty, seemingly, is questionable tax fairness. Dating back to the 1800s, researchers in the U.S. have challenged the property tax system. Over a hundred years ago, they discovered the richest get a "discount" on their taxes, while the poorest are overcharged. Although concerns have been raised throughout the century, this phenomenon still occurs throughout the U.S. today. As The New York Times said in 2021, low-income Americans are getting “cheated” on their property taxes. 

 In 1873, New York assessors inspected over 800 local property assessors and supervisors. They found what University of Chicago researchers found just a couple of years ago: Because of underassessments, homeowners of high-priced homes pay less than they should in property taxes. And through overassessments, homeowners of low-priced homes pay more than they should. Across the nation, this totals up to billions of dollars that low-income homeowners are overpaying, and billions the richest are saving. In Buncombe County, North Carolina, the richest homeowners saved $46 million because of underassessments in 2021.

“High-income homeowners are being asked to pay only 55% of the taxes that they should based on the sale price of their home,” said Joe Minicozzi, principal of data analytics firm Urban3. “That’s a discount of 45%.”

Urban3 calls this disparity the “Assessment Gap.” Whereby the richest are favored by the property tax system and not paying what they owe. And those who can least afford it are generally overpaying on their property taxes.

“If [the law] was enforced the burden of taxation would fall equally upon all having property liable to assessment; but, as it is now everywhere disregarded, taxation is unequal, unjust, and oppressive,” wrote the New York State Property Assessors James A. Briggs, Sterling G. Hadley, and John S. Fowler after their investigation in 1873.

A History of Property Tax Inequalities

Accounts of property tax inequities can be traced back to the days of ancient rulers—such as when Athenian citizens advocated that the tax assessment system was biased and taxes had been raised too high around 431–404 BCE. The following reports are just a few of the people in the last hundred years who have investigated property tax inequities:

In 1926, a years-long debate over property tax fairness with Cook County, Chicago, began. When assessors conducted a revaluation, the Chicago Teachers’ Federation (CTF) expressed concerns over fairness. With the backing of an 1898 law requiring the publication of all assessments, CTF asked for the records—to which the county refused, and a two-year-long legal debate began. When assessors were finally pressed to release the data in 1928, it showed that owners of expensive residential property had a notably lower tax assessment than other homeowners. 

In the mid-1960s, William S. Hendon set out to investigate if there were property tax inequities in Ft. Worth, Texas. When he looked at a group of comparable homes with values that ranged between $5,000 and $10,000, he discovered that Black residents had homes that were assessed at a much higher rate than their white counterparts. Thus, Black residents were paying more in taxes. It seemed clear to Hendon that the system reeked of bias mixed in the math. He concluded that additional comparative studies were needed in order to increase consistency throughout the assessment process.

In 1972, David E. Black conducted an empirical study to evaluate the variations in property tax within the city of Boston, Massachusetts. He wrote, “The lowest effective tax rates tend to prevail in … predominantly single-family-property neighborhoods which have relatively high property values and family incomes, show little or no evidence of physical deterioration, and are inhabited almost exclusively by whites.”

A study in 1973, conducted by the U.S. Department of Housing and Urban Development examined property taxes and urban blight in cities across the U.S. (Atlanta, Baltimore, Chicago, Detroit, Nashville, Oklahoma City, Philadelphia, Portland, Providence, and San Francisco). The authors found that “poor quality housing in blighted neighborhoods, occupied by low-income tenants, pays property taxes at a substantially higher rate than property in other neighborhoods.”

In 1978, Arthur Lyons, an economics professor at the University of Illinois, conducted a review of 68,602 sales in Chicago, Illinois. In an interview with The Chicago Tribune, Lyons remarked that “the patterns are so devastatingly consistent, it's almost as if the [computer] program was written to discriminate against lower-value homes.” The assessor at the time, Thomas M. Tully, refused to permit access to examine the computer program and data.

Why Are These Disparities Happening?

Truthfully, there are a handful of different reasons why property tax disparities are occurring. Research from the Just Accounting for Health project questions the validity of the math used, how often assessments occur, how the system allows for bias calculations, and how the appeals process favors wealthy homeowners.

In North Carolina, compared to owners of less-expensive homes, owners of more expensive homes are not only more likely to participate in the appeals process, but they are also more likely to be granted a value reduction. This process results in hundreds of millions of dollars of adjustments to residential property value annually. 

“We observed countless examples of homes that were granted a lower-assessed value after submitting an appeal, only to be sold the same year for a price that far exceeds the original assessed value,” said Ori Barber, former data analytics researcher with Urban3 for the Just Accounting for Health project. “We cannot rule out the possibility that the appeals process, as currently administered, favors wealthy homeowners and is a factor contributing to the assessment gap.”

For hundreds of years, the entire nation has been burdened with property tax issues. The disparities we face today are nothing new—and it’s not unique to only a few towns or cities. It’s everywhere.

“Should we not strive for a property tax assessment system that produces accurate and equitable valuations the first time—one that does not predicate a fair assessment on a homeowner’s participation in an opaque, time-consuming process?”

— The Just Accounting for Health Consortium

The Just Accounting for Health consortium, based in Western North Carolina, is one advocacy group of many that is working to bring about change to the property tax system. The Just Accounting team will host an important webinar on Friday, June 23, to share the findings from their tax inequity research and advocacy over the last 18 months. You're invited to join the event. Sign up here to attend.

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