An Experiment Involving Property Tax Assessment Quality

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• October 9, 2020
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• October 9, 2020
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We conduct a laboratory experiment to explore the willingness to pay to improve the accuracy of property assessment and three related issues regarding attitudes toward these assessments and taxes. First, we explore individual willingness to pay to improve property assessment accuracy; a more accurate assessment is one with a smaller variance of potential assessments, i.e., a lower risk of an unknown property tax bill. We compare that to what individuals are willing to pay for a reduction in the variance of an equivalent private cost. Second, we explore the extent to which the willingness to pay to improve the accuracy of property assessments depends on whether the risk for other property owners also decreases. We find that subjects do not appear to distinguish between public and private sources of risk. They are responsive to the price of the improvement of property tax assessment accuracy. Finally, we use this result to estimate demand for reduced risk and find that subjects were not willing to pay to reduce the assessment variance to a level consistent with best practices in property tax assessment.