A Quantile Regression Analysis of Assessment Regressivity
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In this chapter, I compare OLS and quantile regression approaches to analyzing assessment regressivity. Property assessments have a pivotal but woefully neglected role in determining the distribution of property tax payments across homeowners. The example used in this chapter is based on sales of homes in DuPage County, Illinois, which is a suburban part of the Chicago metropolitan area. Like all other counties in Illinois (other than the largest, Cook County), properties in DuPage County are supposed to be assessed at 1/3 of market value. All properties in a tax district are then subject to the same tax rate. Apart from homestead exemptions and other relatively minor deductions, this flat-rate tax system should result in tax payments that are proportional to market value. However, a common finding in studies of assessment practices is that assessment ratios—the ratio of the assessed values to actual sales prices—decline with market value. Declining assessment ratios will result in a regressive property tax structure even in the case of a statutorily proportional system (where “regressive” is defined as a system in which the ratio of tax payments to sales prices declines with sale price).