Assessors traditionally enjoy a certain latitude which may be used as de facto "industrial policy" (as the current fashion has it), and has been for decades past, to the degree that assessors must be or are responsive to local political pressures. It is hard to generalize about such biases because the pressures vary according to local attitudes, and the vulnerability to them varies with the local political structure.
Up until 1955 or so the preferential assessment of farmland occurred in many jurisdictions without benefit of law, and the legislative movement kicked off by then-Assemblyman Spiro Agnew of Maryland merely formalized and reinforced, to meet the new pressures of galloping urban sprawl, what had long been the fact. But in other jurisdictions we find assessment that is growth-oriented, where assessors find it difficult to locate new plants until a few years after they are built. In yet others assessment is oriented to "Urban Removal" programs with clear biases against unpopular minorities and/or putative generators of fiscal deficits.
In California, assessors achieved a higher degree of professionalism, and insulation from local politics, by the combination of excellent state supervision, and being elected in extremely large counties containing dozens or hundreds of local mayors and planning commissions. Yet this did not prevent, and probably worsened the bias against owner-occupied homes, as aforementioned.
Hard as it may be, nevertheless we must try to generalize if we are to use assessment data to estimate true values. We must first get an overview of the mosaic of complexity, and then generalize. What follows is my effort to that end.
Not every researcher finds regressive assessment everywhere. Herbert D. Simpson, in his now obsolescent Tax Racket and Tax Reform in Chicago, found otherwise, but I have learned to suspect the provenance of this work. I myself have found it, everywhere I looked in the literature and in the field, and I am convinced it is the prevailing bias, even if not universal. It may be a matter of knowing what to look for.
A bias against homes, for example, is clearly regressive because the mean non-residential holding is much larger. In Milwaukee County industrial land is always underassessed relative to residential land across the street because the working rule is that subdivision triggers land reassessment (and our subject here is land assessment). In Oregon and some other timber states large timber holdings are routinely underassessed because the practice is to assume they will be used more slowly. In most of the Appalachian states the underassessment of coal reserves held by multinational giant corporations is a national scandal.
My own experience is that research grants dry up when one invades this area, which may account for why much of the evidence comes from marginal local crusaders and the Ralph Nader organizations. I was drawing beautiful Lorenz Curves and finding high Gini Ratios just before the Social Credit Party drove me out of British Columbia. It is a sensitive area which you enter at your peril, which reinforces my conviction there is something to it.
The most consistent and pronounced bias documented in the U.S. Census of Governments is that in favor of raw land. On this point there is, to my knowledge, no dispute, except that some people think it is a good policy so long as the land is "agricultural."
The line between raw land and cooked is a gray area, of course. It has been said that the wheel is the greatest invention because it converts real property into personal, a matter of great value in those jurisdictions that exempt some or all personal property from taxation. This point also bears on our present focus, which is land assessment. Building permanent improvements on land is often the trigger for reassessment of the land under and around the building. Running livestock or tractors, which are mere personal property, needs no building permit and triggers no reassessment. Ergo, certain kinds of farm enterprises receive more favorable assessment than other kinds.
In terms of regressivity the U.S. Census of Agriculture makes it very clear that building improvements go with small farms, while breeding stock (the kind that needs fewer buildings than feeder and milking stock) and especially machinery on wheels go with larger farms.
This article is an excerpt from an invited paper presented at the Assessment Workshop cosponsored by USDA-ERS-NRED and the International Association of Assessing Officers, Chicago, IL, June 25-26, 1985. The paper was published in Almy, Richard R., and T.A. Majchrowitz (eds.), Property Tax Assessment (Chicago: U.S. Department of Agriculture, International Association of Assessing Officers, and The Farm Foundation, 1985), pp. 91-109. The whole paper will be published daily in increments over this week and part of next week. This is excerpt 4 of 9.
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MASON GAFFNEY first read about the economist Henry George when a high school junior. After he served in the Pacific during WW II, this interest led him back to get a Ph.D. in Economics at Berkeley, where he tried to meet his teachers’ skepticism and apathy with a dissertation, Land Speculation as an Obstacle to Ideal Allocation of Land. Since then he has published many books and articles on land use, economics, taxation, and public policy. He has been a Professor of Economics at several Universities; a journalist with TIME, Inc.; a researcher with Resources for the Future, Inc.; the head of the British Columbia Institute for Economic Policy Analysis, which he founded; an economic consultant to several businesses and government agencies; and a frequent speaker on economic topics, domestic and foreign, and in political campaigns. He has been Professor of Economics at U.C. Riverside from 1976 through the end of his life. Mason passed in the summer of 2020 and will be lovingly remembered and greatly missed by many. For more information, visit his website at MasonGaffney.org