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Property Value Assessment Growth Limits and Redistribution of Property Tax Payments: Evidence From Michigan

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  • Skidmore, Mark
  • Ballard, Charles L.
  • Hodge, Timothy R.

Abstract

We examine the change in the distribution of property tax payments resulting from Michigan’s imposition of a property tax assessment growth cap in 1994. The cap restricts growth in property value for tax purposes to the inflation rate, for those maintaining continuous ownership. Upon sale, however, the tax base is adjusted to reflect market value. Using data from a survey conducted in 2008, we find that long-time homeowners enjoy an average reduction in effective tax rates (relative to new homeowners) of 19 percent. The cap also appears to have reduced effective property tax rates for older homeowners, and for those with higher incomes.

Suggested Citation

  • 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 509-537, September.
  • Handle: RePEc:ntj:journl:v:63:y:2010:i:3:p:509-37
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    References listed on IDEAS

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    5. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-971, Nov./Dec..
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    7. 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 707-716, September.
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    Cited by:

    1. Sung Hoon Kang & Mark Skidmore & Laura Reese, 2015. "The Effects of Changes in Property Tax Rates and School Spending on Residential and Business Property Value Growth," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 300-333, June.
    2. Skidmore, Mark & Reese, Laura & Kang, Sung Hoon, 2012. "Regional analysis of property taxation, education finance reform, and property value growth," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 351-363.
    3. Anderson, Nathan B., 2012. "Market value assessment and idiosyncratic tax-price risk: Understanding the consequences of alternative definitions of the property tax base," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 545-560.
    4. Johnson, Erik & Walsh, Randall, 2013. "The effect of property taxes on vacation home growth rates: Evidence from Michigan," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 740-750.
    5. William H. Hoyt & Aaron Yelowitz, 2016. "Anticipated Property Tax Increases and the Timing of Home Sales: Evidence from Administrative Data," CESifo Working Paper Series 6264, CESifo Group Munich.
    6. Timothy R. Hodge & Mark Skidmore & Gary Sands & Daniel McMillen, 2013. "Tax Base Erosion and Inequity from Michigan's Assessment Growth Limit: The Case of Detroit," CESifo Working Paper Series 4098, CESifo Group Munich.

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