Property Tax Appeal Process Benefits Wealthy, Non-minority Homeowners

Property taxes in Florida are based on annual assessments of property values made by county officials.  Homeowners in Florida can challenge assessments that they believe overvalue their property and inflate their tax bill.  Informally, the homeowner may meet with the assessor to negotiate for a reduced assessment.  The homeowner may also petition for a formal hearing before a magistrate, who decides whether to grant a reduction after considering the evidence presented.  But is this system impartial and fair?

William Doerner, an economist with the Federal Housing Finance Agency (and former DMC fellowship recipient), and DeVoe Moore Eminent Scholar Keith Ihlanfeldt examined the efficiency and fairness of this system of appeals in Florida and report their findings in their article “An Empirical Analysis of the Property Tax Appeals Process” published in the peer-reviewed Journal of Property Tax Assessment and Administration (2014).

Their study was based on a sample of the property tax appeals initiated by single-family homeowners in Miami-Dade County between 2005 and 2009.  Doerner and Ihlanfeldt regarded the appeals process as “efficient” if it resulted in assessed values corrected to within five percent, plus or minus, of the properties’ fair market values, and as “fair” if class and race do not affect the likelihood of homeowners appealing assessments or receiving reductions.  They gleaned the outcomes of appeals from information in the tax rolls and hearing records.  Additionally, they used price data from homes sold within 24 months of assessment to estimate market values and census block data to distinguish homeowners’ neighborhoods as lower or higher income and as majority white, majority black, majority Hispanic or racially mixed.

Their results revealed a largely random and inequitable appeals system.  Doerner and Ihlanfeldt found assessment reductions were more often insufficient or unwarranted than correct.  On average, between 35 and 50 percent of the homeowners who win their appeals for reductions have properties which have been overassessed – and which remain so even after the reductions.  Nearly a quarter of those given reductions have properties that are already underassessed.  The researchers estimated about 11 percent of homeowners who win informal appeals and 22 percent of those who win formal ones end up with assessments within the correct range.

On the matter of fairness, Doerner and Ihlanfeldt compared the appeal outcomes for homeowners from different types of neighborhoods, controlling for whether their pre-appeal assessments are over, under or at their correct values.  They observed that, relative to homeowners in other neighborhoods, those in majority white neighborhoods are more likely to win informal appeals, to file formal petitions, and (among the higher income) to win formal appeals.  The greater success of these homeowners in their formal appeals is associated with more frequent hiring of tax representatives – attorneys, realtors and other professionals – to advocate for them.

For additional findings, discussion of the possible motivations of homeowners and tax assessors, and recommendations to improve the appeals process, their article can be found in the October 2014 issue of the Journal of Property Tax Assessment & Administration or at http://coss.fsu.edu/keith-ihlanfeldt/wp-content/uploads/2015/04/An-Empirical-Analysis-of-the-Property-Tax-Appeals-Process.pdf.

About DeVoe Moore Center

The DeVoe L. Moore Center is conducts economic research and policy analysis focused on state and local policy issues and is located in the College of Social Sciences and Public Policy at Florida State University in Tallahassee. As an educational institution the DMC provides professional research experience to undergraduate and master’s students through an extensive program of internships and independent study, preparing them for a future in public policy, economic development, public sector accountability and entrepreneurship.
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