An Appraisal of Residential Property Tax Regressivity

The findings of this study indicate, contrary to the recent claims by Aaron [1, 2], among others, that the real estate tax on residential properties is regressive. Using a data base from a sample of household observations for FHA–HUD 203–Program single–family market sales for counties contained in five major United States Standard Metropolitan Statistical Areas (SMSAs), the statistical analyses suggest that the degree of observed regressivity varies significantly across counties and is the result of two forces. First, in many counties, the poor and de facto inequitable assessment practices are the principal causes for property tax regressivity. Second, in some counties that exhibit relatively equitable and uniform assessment practices, the end product appears to be an income regressive property tax. Hence, the property tax in these counties may be intrinsically (slightly) regressive. However, in general, if there were uniform administration of the property tax, it would be (slightly) progressive.