Property Tax Web Series

Abstract

Inequality in funding between school districts has long been associated with inequality in academic achievement and longer-run economic outcomes. Reliance on local property taxes can generate funding inequality across rich and poor school districts. Despite decades of reforms, local property taxes account for around 40 percent of school funding. Reforms typically target two sources of inequality: differences in property values and tax rates. However, another source of funding inequality has been largely overlooked: differences in property assessment accuracy, which affect property values for tax purposes. We analyze a state-level property assessment intervention to show how differences in assessment accuracy across school districts can exacerbate school funding inequality. Using administrative data on property assessments and school funding, we use difference-in-differences and find the intervention increased assessments 44 percent, improved accuracy, and raised total own-source revenues approximately $100 per pupil, equal to about 25 percent of the pre-intervention gap in funding between treated and untreated districts. Limited administrative capacity and political favoritism in poorer school districts played a role in assessment accuracy pre-intervention. Our results show property assessment accuracy can account for a sizable share of school funding inequality, which may persist despite common forms of property assessment oversight.

This paper was presented by Erin Troland (Federal Reserve Board) on November 17, 2023 as part of the 2023-2024 Syracuse-Chicago Webinar Series on Property Tax Administration and Design. Bob Bifulco (Syracuse University) was the discussant for this presentation.