Non-ad valorem assessments on property are a fiscal innovation born from financial stress. Unable to raise property taxes due to limitations, many localities have turned to these charges as an alternative method to fund local services. In this paper, we seek to explain differential levels of non-ad valorem assessment financing through the analysis of property tax records of a large and diverse set of single family homes in California. We theorize that assessments, as opposed to other forms of taxation, will be used when residents hold anti-redistributive preferences. We show that assessment financing is most common in cities with high median household incomes and greater ethnic diversity. We also show that certain types of assessments, those with narrow geographic range, are frequently levied on expensive homes in poorer communities. We argue that this new form of financing exacerbates economic inequality by creating additional inequities in public service provisions.
Mathew D. McCubbins & Ellen C. Seljan, Neighborhoods by Assessment: An Analysis of Non-Ad Valorem Financing In California (June 12, 2016)
Library of Congress Subject Headings
Tax assessment, California, Real property tax, Taxation--Benefit theory, Equality--Economic aspects