Giving Compass' Take:

• Carlos Avenancio and Troup Howard expose how the United States' property tax system creates disproportionately high rates for minority homeowners.

• What can we do to address these life-altering tax-code problems and push for justice? 

• Learn about how systemic racism in housing policies pervades cities across the United States.

In new research, we document large, national inequality in local property tax administration. Looking within regions where every homeowner theoretically faces the same rate of taxation, we find that minority homeowners nonetheless end up paying a 10 percent to 13 percent higher tax rate on average within the same local property tax jurisdiction.

State laws authorizing property taxes make it very clear that the property tax burden homeowners face is intended to be proportional to the market value of their homes. Market values of homes, however, are only observed when a home sells, which happens infrequently. So, property tax bills are based on estimates of market value. This estimate is called a property assessment and is assigned to each home annually for tax purposes by some local official—in most places, by a county assessor. The tax bill that individual homeowners receive is generated by applying the local policy rate to this property assessment.

Homeowners are typically able to contest their property assessment by filing an appeal through some public bureaucratic process. Using data on 3.5 million appeals from Cook County, Illinois, we find that within U.S. Census Bureau block groups, Black and Hispanic residents are less likely to appeal their assessment, less likely to succeed once they have filed an appeal, and, even after succeeding, receive a smaller reduction.

The optimal implementation would use indexes that are smaller and more carefully calibrated to local characteristics than ZIP codes, as we describe in our paper. But the broader point is that assessors can significantly reduce overtaxation of highly minority communities by adopting a rules-based approach that is highly sensitive to differences between small neighborhoods.

Read the full article about property tax by Carlos Avenancio and Troup Howard at Equitable Growth.