The New York Times had an excellent article on property taxation issues a week ago. The article had a nationwide focus, but it included St. Louis County among its data examples. As Missouri is entering its biennial reassessment cycle, the article is especially timely here.
My first work in government was in property assessment and tax issues. I was hired in June of 2001 to work for the St. Louis County Council as an aide. A short time later, the 2001 “Drive-By Assessment” scandal erupted, and the next few months of my life were devoted to property tax and assessment-related constituent work. In 2019, taxpayers in Jackson County experienced a similarly critical and difficult assessment cycle.
The Times story discusses studies that have found that lower-value homes tend to be over-assessed, and higher-value homes tend to be under-assessed. This leads to a shift in the property tax burden to the poor. Why does this happen? It’s due to the way assessment systems work. Home valuations are based on comparable sales data, and at the extreme high and low ends there are fewer sales to compare to. This naturally creates a regression to the mean; houses at the higher end get compared to houses that aren’t quite as expensive, and houses on the lower end get compared to houses that are a bit more expensive. That leads to lower-value homes being over-assessed, and higher-value homes being under-assessed.
That does not mean we should get rid of the average-based assessment system. In fact, I think we should expand on it and stop individually assessing homes every two years. We should just raise or lower assessments based on the average in an area. We could combine that with accurate assessments at sale price for sold properties (important for high-value ones), individual assessments for new construction, and maintaining the appeal system for property owners who believe their property value has increased less than average.
I have been discussing this problem for years. In a 2007 op-ed for the St. Louis Business-Journal, I wrote:
This would safeguard against incorrectly undervaluing properties – particularly expensive ones – that might be underassessed over time by the use of an average-based system.
These changes would make for a much easier rollback of tax rates. When assessments go up, property tax rates are rolled back because assessments are not supposed to lead to a tax increase. However, this isn’t the case for many people. The rollbacks are based on averages, but assessments are currently individual. So if your assessment increased by 20 percent, but the average in the area was only 10 percent, you will get hit with a significant property tax increase. Using an average would mean that everyone faces the same increase, and the same rollback.
I will have much more to say over the coming months about property taxes in Missouri. In particular, it’s time to remove the Kansas City school district’s exemption from property tax rate rollback requirements. That is a big part of the assessment issues in Jackson County that needs to be addressed. But clearly, as the article in the Times shows, we have work to do in Missouri.
