A Re-Examination Of The Property Tax Burden

Abstract

The property tax is the major source of own revenues for most city and county governments, yet economists have had very little definitive information to share with policymakers about the burden that it imposes on local citizens. This is because most previous studies of property taxes have used a Suits index analysis which does not allow for any independent variables other than income. We estimate a regression model using current income and various socio-demographic variables in order to take a more fine grained approach. We use data obtained from the Florida Department of Revenue from 326,976 single family homeowners in four northeast Florida counties geo-coded with the 2010 block group census data. We find that the property tax is regressive with respect to current income. With respect to demographic variables, we find that homeowners over the age of 65 pay a higher average tax rate based on their current incomes. African Americans pay a lower tax rate than other races based on their current income. When we combine income and demographic variables to predict the tax rate paid by a hypothetical low socio-economic status household versus a high socio-economic status household, we find that the high SES household pays a higher average tax rate. Thus, the demographic variables temper the regressivity of the property tax based on current income alone.