Homestead Exemptions, Heterogeneous Assessment, and Property Tax Progressivity

Abstract

Homestead exemption policies are ostensibly intended to reduce the property tax burden of lower-income homeowners. Because assessment rates tend be lower for higher-priced homes, the opposing effects of exemptions and regressive assessments can result in either a regressive or progressive property tax. Using 2018 data on all single-family homes in Florida, we find that in the majority of counties, the homestead exemption dominates regressive assessment, resulting in a progressive tax. We also explore how progressivity would be affected by modifying current features of the property tax, including the homestead exemption take-up rate, the cap on valuation growth, and regressive assessments.