Horizontal and Vertical Inequity in Real Property Taxation

Stacy Sirmans, Dean Gatzlaff and David Macpherson

Journal of Real Estate Literature, 2008, vol. 16, issue 2, 167-180

Abstract: This paper examines the extant literature on horizontal and vertical inequity in the taxation of real property. Some major conclusions from the literature are: (a) horizontal inequity may occur from unequal knowledge of market participants, unequal negotiating skills of buyers and sellers, and actions by officials to limit property tax increases; (b) examples of horizontal inequity include older homes being underassessed relative to newer homes, homes with views being overassessed, and houses with larger lots being underassessed; (c) the degree of horizontal inequity is positively related to the complexity of the jurisdiction's taxing structure; (d) initiatives to limit property taxes such as Proposition 13 create horizontal inequity; (e) models measuring vertical inequity generally examine the relationship between assessed value and market value; (f) studies have attempted to improve the accuracy of vertical inequity models by using simultaneous equations and spline regression; and (g) studies measuring vertical inequity have found both regressive and progressive inequity with slightly more studies finding regressive inequity.

Date: 2008
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DOI: 10.1080/10835547.2008.12090225

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