Obviously, racism figures prominently in this state of affairs, but the obvious question that is raised is whether this is an artifact of the communities in which they live, or does it effect people of color regardless of whether they live in largely segregated communities.
It turns out that it’s a bit of both:
We decompose this finding into two components. We show that slightly more than half of the assessment gap can be explained by between-neighborhood variation. Residential sorting by race in the U.S. means that the average black or Hispanic resident faces a different set of local attributes than a white resident does. Market prices appear to be substantially more sensitive to a wide range of observable neighborhood characteristics than assessed valuations. We use hedonic regressions to show that market prices and assessed values align well on home-level attributes, but diverge on tract-level characteristics. This mismatch, along with residential segregation patterns, generates 6–7 percentage points of the total tax burden inequality.
We show that the remaining 5–6 percentage points of inequality persists even within very small geography. We hypothesize that the main channel for this effect is racial differ- entials in property tax appeals. We use administrative data from Cook County, the second largest county in the US, to demonstrate that such racial differentials can exist: in Cook County, minority residents are 1% less likely to appeal; are 2% less likely to win an ap- peal; and conditional on success, receive a 2–3% smaller reduction. We then exploit racial changes in ownership around property transactions to test for racial differentials in assessment trajectories, and find patterns consistent with an appeals mechanism in the national data.
There are communities that target minorities in all sorts of nefarious ways, (Ferguson, MO) for revenue, AND individual black homeowners are simply charged more, and when they appeal property tax assessments they more likely to be denied.