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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, vol. 61(4), pages 653-671, December.
  • Handle: RePEc:ntj:journl:v:61:y:2008:i:4:p:653-71
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    Cited by:

    1. 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).
    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. 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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