The Impact of Property Assessment Standards on Property Tax Burden: An Examination of Systematic Bias in a Market Value versus a Non-Market Value Assessment Standard

Abstract

Property tax is a tax on estimated values rather than on transactions—an important distinction from other taxes. Another distinction is that each state develops its own system for administering the property tax, including how properties are assessed. The consensus among scholars is that current market value assessment is the standard for achieving the most fair and equitable property tax burden. This study compares two disparate assessment standards in one urban county, analyzing potential determinants of systematic bias. The findings indicate that less systematic bias exists under the market value standard, but that the overall equity is only marginally better horizontally and tended toward a more regressive tax structure. A market value assessment standard may mitigate the inherent inequity (i.e., systematic bias) in a nonmarket value system. However, the inequities in the market value system, which may be less predictable, still must be monitored and addressed.