Property Tax Base Fragmentation and Metropolitan Inequality in the U.S. Robert Manduca, ISR Insights

Why It Matters

Fragmented property‑tax bases amplify metropolitan inequality, limiting equitable access to public services and shaping residents’ socioeconomic trajectories.

Key Takeaways

• Property tax base fragmentation creates fiscal inequality across metros.
• Wealthy enclaves generate high revenue despite low tax rates.
• High economic segregation combined with jurisdictional fragmentation amplifies disparities.
• Tax Base Fragmentation Quotient quantifies property wealth redistribution needed.
• Findings suggest local policy, not just income, shapes residents' outcomes.

Summary

Robert Manduca’s ISR Insights talk examined how the United States’ patchwork of local governments creates stark fiscal inequality through property‑tax base fragmentation. He outlined the outsized role of municipal property taxes—accounting for up to 80% of local revenue—and illustrated how jurisdictional boundaries can decouple tax rates from service quality.

Using data from CoreLogic, Manduca and co‑authors calculated two novel metrics: the fiscal‑capacity ratio, which compares a jurisdiction’s per‑capita property value to its metro average, and the tax‑base fragmentation quotient, a dollar‑weighted dissimilarity index showing how much wealth would need to move across borders to equalize fiscal capacity. The Dallas “Park Cities” example showed that enclaves with 1.3% of the population hold nearly 40% of million‑dollar homes, allowing them to fund superior schools and emergency services despite the lowest tax rates in the region.

He highlighted a stylized model where only the combination of high economic segregation and high jurisdictional fragmentation produces pronounced fiscal gaps, contrasting metros with uniform wealth distribution or single‑jurisdiction governance. The methodology relies on spatially joining property‑assessment records to municipal boundaries, enabling a nationwide view of how wealth is partitioned.

The findings imply that local fiscal architecture, not merely household income, shapes residents’ life chances. Policymakers may need to reconsider inter‑jurisdictional revenue sharing or state‑level equalization mechanisms to mitigate the inequities generated by fragmented tax bases, especially as they influence education, public safety, and broader economic mobility.

Original Description

Property taxes are the largest source of funding for local governments in the United States, totaling more than $700 billion annually. But because of the highly fragmented nature of US local governments, property taxes are highly unequal, with local tax bases frequently varying by a factor of ten or more across distances of just a few miles--or even a single block. Using a dataset of 138 million geocoded property tax records, this project measures the extent of tax base fragmentation in the United States, identifying the metropolitan areas with the largest disparities in property taxes between jurisdictions. In addition, we identify hundreds of "municipal tax havens," municipalities with extreme concentrations of wealth that effectively operate as tax shelters for residents and corporations based there.

This talk is part of the ISR Insights Speaker Series.