How Systemic Racism Is Embedded in Property Taxes

Research shows how decades of unfair practices has led to inequality.

Posted Jul 14, 2020

Christian Hinkle/Adobe Stock
Source: Christian Hinkle/Adobe Stock

For some Americans, understanding systematic racism is now a top priority. Sociology scholars explain that racism does not simply entail harboring ill feelings toward people of different races, but also the structural ways the American cultural and political system have disadvantaged Black people for centuries.

An aspect of American systemic racism is explained in a new longitudinal working paper by economists at the University of Utah and Indiana University. They combined data from 118 million homes in America with property taxes from 75,000 municipalities over the course of a decade to examine whether racial minorities are taxed at a higher rate than White Americans.

The paper describes what the authors call an “assessment gap.” Essentially, local governments place a disproportionate tax burden on racial and ethnic minorities. Their analysis demonstrates that Black and Hispanic residents pay 10 to 13 percent higher taxes than White residents for the same public services.

In almost every state, property tax assessments were higher in areas with more Black and Hispanic residents. The authors show that the higher assessments are not because of differences in the buildings or land, but they are connected to the racial composition of neighborhoods.

How did this happen? According to history scholars, many county tax assessors intentionally overvalued black properties, sometimes in direct retaliation for black political action.

The authors also demonstrate that the property values of homes owned by racial minorities appreciate more slowly compared to homes owned by White people. (This could be a result of buyers intentionally avoiding neighborhoods with a majority of racial minority residents.) But assessors do not take into account the fact that minority-owned properties appreciate at a slower rate; they will assume minority-owned homes gain value at the same rate as White-owned homes, and increase the assessment accordingly. This means property taxes for Black and Hispanic Americans can quickly exceed their homes’ values.

The system for appealing property tax assessments also puts Black Americans at a disadvantage. Nationwide data for assessment appeals do not exist. But the authors did analyze appeal data available in Cook County, Illinois. They reviewed a total of 3.4 million property tax appeals over a 12-year period and found Black homeowners were significantly less likely to file an appeal. When they did file, they were less likely to win. And if they did win, the reductions in their assessments were smaller than those of White people who made similar appeals.

The authors went a step further to ask the question: Are higher tax rates for Black Americans more likely to occur in communities with more hostility to Black Americans? To answer this question, they used search data from Google to look at the intensity of searches containing offensive descriptions for Black people. They found that the “assessment gap” — or the over-taxing of Black Americans — is more prominent in places with more offensive racial Google searches.

The authors do offer up a solution to this problem — by training assessors to be more sensitive to how race impacts local housing markets and follow a simple formula: When a house is purchased, the selling price becomes the new assessed value. After that, the assessment is adjusted based on the local housing price index. The authors tried this formula with a sample of homes from their study and found that it would reduce overall inequality in property taxes by 55 to 70 percent.

The take-home message: Unfair property taxes are one element of systemic racism in the U.S. There is a simple solution to reversing this inequity, but it requires action by local governments.

Visit Cornell University’s Bronfenbrenner Center for Translational Research’s website for more information on our work.