Horizontal Inequity in the Property Taxation of Apartment, Industrial, Office, and Retail Properties

Abstract

Researchers have carefully examined assessment uniformity in ad valorem taxation for single-family residential properties and they have frequently reported nonuniform outcomes in the appraisal of these properties. This study analyzes the uniformity of assessed valuations across apartment, industrial, office, and retail properties in Maricopa County (Metropolitan Phoenix), Arizona. Specifically, we investigate horizontal equity, which results when the assessment ratio (assessed value/sales price) is uniform across properties with similar market values. We examine horizontal equity over a five-and-one-half-year period (January 1998-June 2003). After applying both parametric and nonparametric tests, we find statistically significant evidence of horizontal inequity. We find that retail properties are underassessed compared to apartments, and office properties are over assessed compared to apartments; however, we find little difference between industrial and apartment properties. We also find that properties owned by out-of-state residents are overassessed compared to properties owned by in-state residents.