Journal of Property Tax Assessment & Administration
Abstract
As state and local governments plunged into budget crises caused by the loss of sales, income, and other tax revenues in 2020, this study presents an examination of the Great Recession's effects on property tax collections in large American cities. Herein we explore the interactions between property tax components and key socioeconomic indicators in urban economies. In particular, we report how changes in house prices, household incomes, and employment affect the interactions among assessed values, levies, collections, and property tax revenues. The stylized model we develop presents how, through property tax levies, valuations, and collection rates, property tax revenues are impacted. To correct for endogeneity among the variables, we use seemingly unrelated regressions and three-stage least squares estimators. The dataset includes financial indicators for the 147 largest American cities collected from 2003-2012. Results show that during recessions, declining house prices reduce assessed valuations, and reduced tax collection rates further compound this negative fiscal effect. The inelastic response of tax revenues to assessed values suggests that jurisdictions take back the difference by re-setting millage rates. Because each part of the levying and collecting process is very sensitive to the economic environment, revenue estimation for large cities becomes more difficult during recessions.
Keywords
Economic indicators; Recessions - United States
Recommended Citation
Krupa, O., & Kriz, K. A. (2021). Property tax assessments, collections, and revenue performance in economic downturns : an examination of large American cities. Journal of Property Tax Assessment & Administration, 18(1). Retrieved from https://researchexchange.iaao.org/jptaa/vol18/iss1/3
