Taking a Magnifying Glass to Property Tax Inequities
(Source: Flickr.)
Put yourself in the shoes of your local tax assessor, sketchbook and tape measure in hand, who this afternoon has the nerve-racking job of walking up to a stranger’s property to levy a judgment that might mean hundreds or thousands of dollars to a homeowner. No one wants a person snooping around to make sure they're paying their fair share in property taxes. It’s not unheard of for a tax assessor to knock on a door, have a gun pulled on them, and then be accused of trespassing.
There is some uncertainty and tension around the topic of tax assessment and those who calculate the amount owed to the government. It’s a subject that’s typically left in the shadows and forgotten until someone wants to appeal their property tax bill. In many counties, the system feels arbitrary and the process of calculating property taxes seems unknown—even the process of becoming a tax assessor can be a mystery to the outsider.
The Just Accounting for Health consortium, which includes Strong Towns, is taking a magnifying glass to this mystery by collecting data and researching the potential causes of property tax inequities in Western North Carolina. In many counties across the nation the property tax burden has been shifted from owners of larger and more expensive properties to people who own smaller and less expensive homes. The Just Accounting project is meant to bring about an understanding of the presence and effects of biases in property tax assessment standards, and to suggest possible solutions.
One of the first steps in this project is to learn more about the role of a tax assessor and how these important municipal employees make determinations which have such large consequences for homeowners. To become an accredited assessor, the individual must complete certifications and courses, which differ state by state. This education is regularly updated through county programs that may consist of courses, workshops, seminars, conferences, or regional tax meetings. In North Carolina, these courses are designed to educate the tax assessor in the fundamentals of assessment and appraisal processes.
Depending on the property type, there can be various types of taxes assessed on land and structures. For example, when a piece of land is vacant, it might have a lower property tax rate compared to a bustling Walmart.
To discover the property tax amount, an assessor will typically first look at the appraised value of the property by using a combination of methods: the cost method, the income method, and a sales evaluation. This graphic shows a typical process for calculating a property tax bill In Western North Carolina:
Once the value of the property is determined by the local county assessor, they subtract any exemptions made by the North Carolina General Assembly. That amount is multiplied by the tax rate set by the local board of commissioners. Then we have the tax bill amount to be mailed to the property owner and collected by the local tax collector.
There’s a lot of variables in the process of determining the value of a property; the assessor may look at comparable properties and evaluate the replacement costs, maintenance costs, any improvements made, income being made from the property (if applicable), and how much interest may be charged to invest in a similar property.
When assessors follow the systems in place they should arrive at a fair and correct tax rate. Yet our country is riddled with property tax inequities. There is an overarching feeling the system is unjust and arbitrary, and despite new technology and funds we have tossed at our current assessment system, it still seems muddled with bias and confusing disparities.
What is the real reason behind these striking property tax disparities? Is the system at fault? Is the assessor at fault? Does the system require more funding?
Last year Urban3, now partnered in the Just Accounting for Health project consortium, discovered property tax inequities in Buncombe County, North Carolina. Lower-cost homes were being overvalued and higher-cost homes were being undervalued.
This may, in part, be due to how comparable home values are collected in the reappraisal process. To determine appraised values in Buncombe County, lots are broken up into “tax neighborhoods,” meaning properties on the market are assessed as a group. These “neighborhoods” are determined by features that could affect the market cost.
The following chart shows the housing costs in Buncombe County:
The middle of the chart shows that the majority of housing rests in the $250,000 to $300,000 range, while the more expensive or less expensive homes have fewer sales. This means that when “neighborhoods” are created, there are less comparable options for homes on either far end of the scale. So homes stacked on the less expensive side get grouped with more expensive housing; then homes on the more expensive side get pulled down toward the less expensive properties.
It may be more difficult to determine the correct appraised value for these homes on the edges of the spectrum because appraisal math is centered on the “average price per square foot,” or “average price of a two-bedroom home in a specific neighborhood.” There’s simply fewer sales to create an approximate comparison between properties, resulting in uncertainty in the calculated values at either end of the spectrum.
With these uncertainties, it will be a challenge to uncover the reasons for these widespread property tax inequities. Through the next 18 months, Strong Towns will be working with Just Accounting for Health to better understand the presence and effects of biases in tax assessment standards. The team will also strive to answer the question: How do systemic biases in local property tax policies and practices influence health equity in Western North Carolina?
We’ll be presenting our findings and chronicling the twists and turns of the research process. If you’d like to join us on the journey, sign up for our email alerts.
Seairra Jones serves as the Staff Writer/Story Producer for Strong Towns. In the past, she's worked as a freelance journalist and videographer for a number of different organizations. She currently resides between small-town Illinois and the rural Midwest with her husband, where they help manage a family homestead. When Seairra isn’t focusing on how to make our towns stronger, you can find her outside working on the farm, writing fictional tales in a coffee shop, or reading in a hammock.