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Thin Markets and Property Tax Inequities: A Multinomial Logit Approach

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  • McMillen, Daniel P.
  • Weber, Rachel N.

Abstract

When property tax assessment ratios vary, the costs of public services are unevenly redistributed. More sales in a census tract should help to improve assessment uniformity while providing homeowners with a stronger basis for appeals. Using data from Chicago to estimate a multinomial logit model that characterizes the distribution of assessment ratios, we find that a variable measuring sales frequency is highly significant with the predicted effect: both unusually high and low ratios are more likely to occur in areas with few comparable sales. We find less evidence to support the notion that thin markets are responsible for regressive distributions, whereby assessment ratios are higher for low–value homes than they are for high–value ones. Accounting for sales frequency reduces but does not eliminate our finding of regressivity.

Suggested Citation

  • McMillen, Daniel P. & Weber, Rachel N., 2008. "Thin Markets and Property Tax Inequities: A Multinomial Logit Approach," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(4), pages 653-671, December.
    • Handle: RePEc:ntj:journl:v:61:y:2008:i:4:p:653-71
    DOI: 10.17310/ntj.2008.4.05
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    Cited by:

    1. Olha Krupa, 2014. "Housing Crisis and Vertical Equity of the Property Tax in a Market Value–based Assessment System," Public Finance Review, , vol. 42(5), pages 555-581, September.
    2. Shi, Song & Young, Martin & Hargreaves, Bob, 2009. "Issues in measuring a monthly house price index in New Zealand," Journal of Housing Economics, Elsevier, vol. 18(4), pages 336-350, December.
    3. Fatin Afiqah Md. Azmi, 2022. "Patterns in Number of Property Transactions of Pre-War Shophouse Case Study: Penang, Malacca and Kelantan ," GATR Journals gjbssr614, Global Academy of Training and Research (GATR) Enterprise.
    4. Seth B. Payton, 2012. "The Impact of Property Assessment Standards on Property Tax Burden," Public Finance Review, , vol. 40(5), pages 584-613, September.
    5. Rachel N. Weber & Daniel P. McMillen, 2010. "Ask and Ye Shall Receive? Predicting the Successful Appeal of Property Tax Assessments," Public Finance Review, , vol. 38(1), pages 74-101, January.
    6. Carlos F. Avenancio-León & Troup Howard, 2020. "The Assessment Gap: Racial Inequalities in Property Taxation," Opportunity and Inclusive Growth Institute Working Papers 34, Federal Reserve Bank of Minneapolis.
    7. Mayor, Karen & Lyons, Seán & Tol, Richard S. J., 2010. "Designing a property tax without property values: Analysis in the case of Ireland," Papers WP352, Economic and Social Research Institute (ESRI).
    8. Justin M. Ross, 2012. "Interjurisdictional Determinants of Property Assessment Regressivity," Land Economics, University of Wisconsin Press, vol. 88(1), pages 28-42.

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