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Tax Base Erosion and Inequity from Michigan's Assessment Growth Limit: The Case of Detroit

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Author Info

  • Timothy R. Hodge
  • Mark Skidmore
  • Gary Sands
  • Daniel McMillen

Abstract

In this paper we examine the degree to which Michigan’s property value assessment growth cap has eroded the tax base and created substantial differences in effective tax rates among residential properties within the City of Detroit. While the analysis focuses on a specific city with significant tax base erosion challenges, it is relevant to other cities in Michigan and across the nation, particularly in states that impose assessment growth limits. Using quantile regression techniques, we examine how an assessment growth cap alters effective tax rate distributions within and across property value groups. Results show that the cap creates a wide range of effective tax rates across properties of similar value (horizontal inequity), and similar tax payments for properties of differing values (vertical inequity).

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-01/cesifo1_wp4098.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4098.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4098

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Related research

Keywords: property tax; assessment growth limit; equity; quantile regression;

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References

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  1. Skidmore, Mark & Ballard, Charles L. & Hodge, Timothy R., 2010. "Property Value Assessment Growth Limits And Redistribution Of Property Tax Payments: Evidence From Michigan," National Tax Journal, National Tax Association, vol. 63(3), pages 509-37, September.
  2. Moshe Buchinsky, 1998. "Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 88-126.
  3. Dye, Richard F. & McMillen, Daniel P. & Merriman, David F., 2006. "Illinois' Response to Rising Residential Property Values: An Assessment Growth Cap in Cook County," National Tax Journal, National Tax Association, vol. 59(3), pages 707-16, September.
  4. Mark Skidmore & Mehmet S. Tosun, 2011. "Property Value Assessment Growth Limits, Tax Base Erosion, and Regional In-Migration," Public Finance Review, , , vol. 39(2), pages 256-287, March.
  5. Skidmore, Mark, 1999. " Tax and Expenditure Limitations and the Fiscal Relationships between State and Local Governments," Public Choice, Springer, Springer, vol. 99(1-2), pages 77-102, April.
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Cited by:
  1. Alm, James & Hodge, Timothy R. & Sands, Gary & Skidmore, Mark, 2014. "Property Tax Delinquency - Social Contract in Crisis: The Case of Detroit," Working Paper Series 3149, Victoria University of Wellington, Chair in Public Finance.

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