Property taxes, the lifeblood of local governments and school districts, are among the most powerful and stealthy engines of racism and wealth inequality our nation has ever produced. And while the Biden administration has offered many solutions for making the tax code fairer, it has yet to effectively tackle a problem that has resulted not only in the extraordinary overtaxation of Black and Latino homeowners but also in the worsening of disparities between wealthy and poorer communities. Fixing these problems requires nothing short of a fundamental re-examination of how taxes are distributed.
In theory, the property tax would seem to be an eminently fair one: The higher the value of your property, the more you pay. The problem with this system is that the tax is administered by local officials who enjoy a remarkable degree of autonomy and that tax rates are typically based on the collective wealth of a given community. This results in wealthy communities enjoying lower effective tax rates while generating more tax revenues; at the same time, poorer ones are forced to tax property at higher effective rates while generating less in return. As such, property assessments have been manipulated throughout our nation’s history to ensure that valuable property is taxed the least relative to its worth and that the wealthiest places will always have more resources than poorer ones.
Black people have paid the heaviest cost. Since they began acquiring property after emancipation, African Americans have been overtaxed by local governments. By the early 1900s, an acre of Black-owned land was valued, for tax purposes, higher than an acre of white-owned land in most of Virginia’s counties, according to my calculations, despite being worth about half as much. And for all the taxes Black people paid, they got little to nothing in return. Where Black neighborhoods began, paved streets, sidewalks and water and sewer lines often ended. Black taxpayers helped to pay for the better-resourced schools white children attended. Even as white supremacists treated “colored” schools as another of the white man’s burdens, the truth was that throughout the Jim Crow era, Black taxpayers subsidized white education.
Freedom from these kleptocratic regimes drove millions of African Americans to move to Northern and Midwestern states in the Great Migration from 1915 to 1970, but they were unable to escape racist assessments, which encompassed both the undervaluation of their property for sales purposes and the overvaluation of their property for taxation purposes. During those years, the nation’s real estate industry made white-owned property in white neighborhoods worth more because it was white. Since local tax revenue was tied to local real estate markets, newly formed suburbs had a fiscal incentive to exclude Black people, and cities had even more reason to keep Black people confined to urban ghettos.
As the postwar metropolis became a patchwork of local governments, each with its own tax base, the fiscal rationale for segregation intensified. Cities were fiscally incentivized to cater to the interests of white homeowners and provide better services for white neighborhoods, especially as middle-class white people began streaming into the suburbs, taking their tax dollars with them.
One way to cater to wealthy and white homeowners’ interests is to intentionally conduct property assessments less often. The city of Boston did not conduct a citywide property reassessment between 1946 and 1977. Over that time, the values of properties in Black neighborhoods increased slowly when compared with the values in white neighborhoods or even fell, which led to property owners’ paying relatively more in taxes than their homes were worth. At the same time, owners of properties in white neighborhoods got an increasingly good tax deal as their neighborhoods increased in value.
As was the case in other American cities, Boston’s decision most likely derived from the fear that any updates would hasten the exodus of white homeowners and businesses to the suburbs. By the 1960s, assessments on residential properties in Boston’s poor neighborhoods were up to one and a half times as great as their actual values, while assessments in the city’s more affluent neighborhoods were, on average, 40 percent of market value.
Jersey City, N.J., did not conduct a citywide real estate reassessment between 1988 and 2018 as part of a larger strategy for promoting high-end real estate development. During that time, real estate prices along the city’s waterfront soared but their owners’ tax bills remained relatively steady. By 2015, a home in one of the city’s Black and Latino neighborhoods worth $175,000 received the same tax bill as a home in the city’s downtown worth $530,000.
These are hardly exceptions. Numerous studies conducted during those years found that assessments in predominantly Black neighborhoods of U.S. cities were grossly higher relative to value than those in white areas.
These problems persist. A recent report by the University of Chicago’s Harris School of Public Policy found that property assessments were regressive (meaning lower-valued properties were assessed higher relative to value than higher-valued ones) in 97.7 percent of U.S. counties. Black-owned homes and properties in Black neighborhoods continue to be devalued on the open market, making this regressive tax, in effect, a racist tax.
The overtaxation of Black homes and neighborhoods is also a symptom of a much larger problem in America’s federated fiscal structure. By design, this system produces winners and losers: localities with ample resources to provide the goods and services that we as a nation have entrusted to local governments and others that struggle to keep the lights on, the streets paved, the schools open and drinking water safe. Worse yet, it compels any fiscally disadvantaged locality seeking to improve its fortunes to do so by showering businesses and corporations with tax breaks and subsidies while cutting services and shifting tax burdens onto the poor and disadvantaged. A local tax on local real estate places Black people and cities with large Black populations at a permanent disadvantage. More than that, it gives middle-class white people strong incentives to preserve their relative advantages, fueling the zero-sum politics that keep Americans divided, accelerates the upward redistribution of wealth and impoverishes us all.
There are technical solutions. One, which requires local governments to adopt more accurate assessment models and regularly update assessment rolls, can help make property taxes fairer. But none of the proposed reforms being discussed can be applied nationally because local tax policies are the prerogative of the states and, often, local governments themselves. Given the variety and complexity of state and local property tax laws and procedures and how much local governments continue to rely on tax reductions and tax shifting to attract and retain certain people and businesses, we cannot expect them to fix these problems on their own.
The best way to make local property taxes fairer and more equitable is to make them less important. The federal government can do this by reinvesting in our cities, counties and school districts through a federal fiscal equity program, like those found in other advanced federated nations. Canada, Germany and Australia, among others, direct federal funds to lower units of government with lower capacities to raise revenue.
And what better way to pay for the program than to tap our wealthiest, who have benefited from our unjust taxation scheme for so long? President Biden is calling for a 25 percent tax on the incomes and annual increases in the values of the holdings of people claiming more than $100 million in assets, but we could accomplish far more by enacting a wealth tax on the 1 percent. Even a modest 4 percent wealth tax on people whose total assets exceed $50 million could generate upward of $400 billion in additional annual revenue, which should be more than enough to ensure that the needs of every city, county and public school system in America are met. By ensuring that localities have the resources they need, we can counteract the unequal outcomes and rank injustices that our current system generates.
Andrew W. Kahrl is a professor of history and African American studies at the University of Virginia and the author of “The Black Tax: 150 Years of Theft, Exploitation, and Dispossession in America.”
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