Report-Oregon-Property-Tax-Capitalization-FINAL
Report-Oregon-Property-Tax-Capitalization-FINAL
Report-Oregon-Property-Tax-Capitalization-FINAL
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24<br />
OREGON PROPERTY TAX CAPITALIZATION: EVIDENCE FROM PORTLAND<br />
Figure 7: Summary of Effects<br />
Average Portland House<br />
Sale Price = $ 313,995 | 1,600 Sqft<br />
<strong>Tax</strong> Rate (on AV) = 2.1% | RMV = $291,490<br />
AV/RMV Ratio = 65% | Effective <strong>Tax</strong> Rate (on RMV) = 1.37%<br />
AV/RMV Ratio<br />
45% 55% 65% 70% 75%<br />
Assessed <strong>Tax</strong> $2,755 $3,366 $3,979 $4,284 $4,591<br />
Actual <strong>Tax</strong> $2,755 $3,366 $3,979 $4,284 $4,372<br />
Sale Price<br />
Sale Price Change<br />
(Lower Bound)<br />
Sale Price Change<br />
(Upper Bound)<br />
$320,203 -<br />
$344,829<br />
$317,099 -<br />
$329,412<br />
$313,995<br />
$312,443 -<br />
$306,287<br />
Assuming a discount rate of 3% and perpetual lifespan of properties, we find that the<br />
capitalization of property taxes into property value in the Portland area ranges from 15% to 92%.<br />
Assuming a higher discount rate of 7% and a perpetual lifespan, capitalization of property taxes<br />
into property values is estimated to be between 35% and 215%. If property lifespans are assumed<br />
to be shorter, the capitalization effect will increase accordingly. We can conclude that property<br />
tax differentials within the jurisdiction do indeed impact home values (i.e., artificially lower<br />
property tax results in higher property value, holding everything else constant). It is clear that<br />
property values are a function of its own property characteristics, neighborhood characteristics,<br />
overall economic conditions and quantity and quality of public services.<br />
<strong>Oregon</strong>’s Electric Vehicle Industry<br />
$310,891 -<br />
$298,578<br />
$6,208 $3,104 -$1,552 -$3,104<br />
$30,834 $15,417 -$7,709 -$15,417<br />
However, because many of these characteristics may be unobservable, non-quantifiable or<br />
imprecisely measured by the available data, it is difficult to definitively define the exact<br />
magnitude of capitalization through this exercise. The necessary assumptions to accurately<br />
characterize property tax capitalization (e.g., choices of an appropriate social discount rate and<br />
property lifespan) further circumvent our ability to pinpoint the magnitude of capitalization<br />
without further research. Further research directions and improvements are outlined in the<br />
following section.<br />
Northwest Economic Research Center
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