Lincoln Institute of Land Policy

Report Part Title: Front Matter

Report Title: Assessment of Property Tax Reductions on Tax Delinquency, Tax Foreclosure,
and Home Ownership
Report Author(s): Fernanda Alfaro, Dusan Paredes and Mark Skidmore
Published by: Lincoln Institute of Land Policy (2021)
Stable URL: https://www.jstor.org/stable/resrep43187.1

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Assessment of Property Tax Reductions on Tax
Delinquency, Tax Foreclosure, and Home
Ownership
Working Paper WP21FA1

Fernanda Alfaro

Dusan Paredes
Universidad Católica del Norte

Mark Skidmore
Michigan State University

January 2021
The findings and conclusions of this Working Paper reflect the views of the author(s) and have not been
subject to a detailed review by the staff of the Lincoln Institute of Land Policy. Contact the Lincoln Institute
with questions or requests for permission to reprint this paper. help@lincolninst.edu

© 2021 Lincoln Institute of Land Policy

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 Abstract

In this report, we provide an evaluation of the impacts in Detroit of reductions in residential

effective tax rates on tax delinquency, property tax foreclosure, and homeownership. The decline
in effective tax rates was driven by a citywide reassessment, which significantly reduced
effective tax rates. These estimates are used to infer the potential impacts of moving from a
traditional property tax to a split-rate tax in which the tax rate applied to land is higher than the
tax rate applied to structures. Using parcel-level data from Detroit over the years 2012–2019, we
find that tax reductions resulting from the property reassessment generated meaningful
improvements in tax compliance as well as increases in homeownership. Our evaluation also
suggests that moving to a split-rate tax would improve property tax compliance and increase
homeownership in Detroit.

Keywords: Property Tax, Land Tax, Split-Rate Tax, Detroit, Tax Delinquency, Tax Foreclosure,
Home Ownership

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 About the Authors

Fernanda Alfaro received a bachelor’s degree in business management at the Universidad

Católica del Norte and she recently received a master’s degree in applied economics (with an
emphasis in regional studies) from the same university. Her research interests are public goods
provision and local taxes. She can be contacted at fernanda.alfaro.g@gmail.com.

Dusan Paredes is an associate professor of economics at the Universidad Católica del Norte. He
serves as the dean of the Department of Economics and Business Management. He is president
of the Chilean Society of Regional Studies, and he spends time as a visiting researcher at both
Michigan State University and the University of Illinois Urbana-Champaign. His research
focuses on strategies for identifying the causal mechanisms of problems characterized by spatial
spillovers in the areas of regional and urban economics. He can be contacted at dparedes@ucn.cl.

Mark Skidmore is a professor and the Morris Chair in State and Local Government Finance and
Policy at Michigan State University. He holds tenure system appointments in the Department of
Agricultural, Food and Resource Economics and the Department of Economics. He currently
serves as co-editor of the Journal of Urban Affairs and is a distinguished scholar at the Lincoln
Institute of Land Policy. His research includes topics in urban/regional development, public
finance and policy, and economics of natural disasters. He can be contacted at
mskidmor@msu.edu.

Acknowledgements

We thank Evan Cunningham from the City of Detroit for providing parcel-level data. We also
thank Jerry Paffendorf and Nick Downer of Loveland Technologies for providing parcel-level
data on tax foreclosures. Nick Allen, John Anderson, Andrew Hanson, Zack Hawley, Adam
Langley, Semida Munteanu, and Zhou Yang provided assistance and helpful comments. This
research was funded by Invest Detroit.

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