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Vertical Equity in the Taxation of Single Family Homes

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Abstract

Vertical equity in ad valorem real property taxation is the concept that all properties within a taxing jurisdiction are assessed in equal proportion to their fair market value. This study examines the assessment of single family homes in Bellingham, Washington, utilizing a database of 1,118 home sales in the southern half of Bellingham that sold during the time period of January, 1990 through June, 1994. The results of several empirical tests suggest the presence of regressive vertical inequity. It appears that higher market value homes are assessed at a lower proportion of their value (sales price) than less expensive homes. These results suggest that property taxation at the local level magnifies the regessivity of Washington State's already highly regressive state tax system. Why does this apparent regressive vertical inequity exist? The authors offer several possibilities including the propensity of wealthy homeowners to challenge property tax assessments, the difficulty of valuing the amenities inside an upper-end home, the heterogeneity of the upper-end home market coupled with a small number of transactions, and the lack of ample staff and other resources at the County Assessor's office.

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File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol14n03/v14p215.pdf
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Bibliographic Info

Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

Volume (Year): 14 (1997)
Issue (Month): 3 ()
Pages: 215-232

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Handle: RePEc:jre:issued:v:14:n:3:1997:p:215-232

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Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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Web page: http://www.aresnet.org/

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Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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  1. Benson, Earl D, et al, 1998. "Pricing Residential Amenities: The Value of a View," The Journal of Real Estate Finance and Economics, Springer, vol. 16(1), pages 55-73, January.
  2. Mark A. Sunderman & John W. Birch & Roger E. Cannaday & Thomas W. Hamilton, 1990. "Testing for Vertical Inequity in Property Tax Systems," Journal of Real Estate Research, American Real Estate Society, vol. 5(3), pages 319-334.
  3. Clapp, John M, 1990. "A New Test for Equitable Real Estate Tax Assessment," The Journal of Real Estate Finance and Economics, Springer, vol. 3(3), pages 233-49, September.
  4. Kochin, Levis A & Parks, Richard W, 1982. "Vertical Equity in Real Estate Assessment: A Fair Appraisal," Economic Inquiry, Western Economic Association International, vol. 20(4), pages 511-32, October.
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Cited by:
  1. Brent C. Smith, 2000. "Applying Models for Vertical Inequity in the Property Tax to a Non-Market Value State," Journal of Real Estate Research, American Real Estate Society, vol. 19(3), pages 321-344.
  2. Earl D. Benson & Arthur L. Schwartz, Jr., 2000. "An Examination of Vertical Equity Over Two Reassessment Cycles," Journal of Real Estate Research, American Real Estate Society, vol. 19(3), pages 255-273.
  3. Gary C. Cornia & Barrett A. Slade, 2005. "Property Taxation of Multifamily Housing: An Empirical Analysis of Vertical and Horizontal Equity and Assessment Methods," Journal of Real Estate Research, American Real Estate Society, vol. 27(1), pages 17-46.
  4. John Merrifield & Yong Bao, . "Residential Property Taxation: Is Periodic Reassessment worth it?," Working Papers 0003, College of Business, University of Texas at San Antonio.
  5. Marcus T. Allen & William H. Dare, 2009. "Changes in Property Tax Progressivity for Florida Homeowners after the “Save Our Homes Amendment?," Journal of Real Estate Research, American Real Estate Society, vol. 31(1), pages 81-92.

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