Who benefits most from property assessment taxes? Evidence from Los Angeles County

ABSTRACT

Assessment caps on property taxes are often assumed to benefit affluent homeowners the most with little gains for low-income households. Quantile regression results for Los Angeles County show that on average effective property tax rates decrease by $1994 per year due to length of ownership in the 50th percentile because of California’s Proposition 13 assessment cap. There is evidence of both horizontal and vertical inequity across the entire sample. Low-income households do benefit from California’s assessment cap as they are typically infrequent movers but their effective tax rates decrease over time. However, the most affluent households by market value do not gain the most and there is no evidence of horizontal inequity for these homeowners. There is also no evidence of horizontal inequity for middle-income households. Property tax savings vary between $18,000 and $40,000, depending on the assessed value decile and percentage quantile.

KEYWORDS:

• California Proposition 13
• horizontal and vertical inequity
• effective property taxes
• quantile regression

JEL CLASSIFICATION:

• R23
• R28

Disclosure statement

No potential conflict of interest was reported by the author.