Income distribution effects of the urban property tax with emphasis on the reappraisal lag: a theoretical and empirical analysis of the Multnomah Couny experience

摘要

There exist a number of factors which operate as potentially significant determinants of the distributional impact of the property tax within any specific urban or metropolitan area. This study is an attempt to explain the income distribution effects of one factor – the property tax reappraisal lag. The study is limited mainly to the impact of the lag on owners of single-family housing. An income distribution problem arises because each property subject to the property tax is reappraised only every five or six years. Each Oregon county is divided into five or six maintenance districts to facilitate reappraisal. For example, Multnomah County, which is the subject area of the thesis text, currently has five maintenance districts. All properties in one maintenance district are reappraised each year. Insofar as property values, as well as the income of the owners of these properties, experience differential movements during the five-year period in which the original appraisal is maintained on the assessment rolls, the reappraisal lag redistributes the property tax burden within the area. The hypothesis presented here is that the property tax reappraisal lag operates to increase the burden of the property tax on owners of lower-value single-family housing, while at the same time diminishing the burden of the tax on owners of higher-value single-family housing. In order to test this hypothesis, a sample was drawn from single-family housing sales data maintained by the Sales Ratio Division of the Multnomah County Assessors’ Office. Multnomah County maintains computerized records of all property transfers occurring within Multnomah County. Through the use of simple and multiple regression analysis, it was possible to examine the following questions: (1) what factors produce the initial assessment level pattern in Multnomah County; (2) how does the reappraisal lag affect the initial assessment pattern; and (3) what are the distribution effects of the initial assessment level and the reappraisal lag pattern. The results of the study strongly support the hypothesis. Within Multnomah County the reappraisal lag operates to redistribute approximately $1,200,000 per year from owners of lower-value to owners of higher-value single-family housing, significantly increasing tax burdens on lower-income groups. The redistribution of tax burdens is complicated by the relationship between business and residential property. If redistribution occurs only within the single-family housing property class, owners of housing valued below approximately $14,605 would experience a decline in tax burden, while owners of housing valued above this amount would experience an increase in tax burden. If redistribution results in a lower tax rate for business property, the cross-over point mentioned above would decline to approximately $10,260. At the same time, because of the tax rate decline effect, there would be a net shift of tax burden roughly equal to $2.8 million per year from business to residential property.