Evening star., 1934-12-24
Whv ''EValuated Rate" Method
Provides a Faulty Yardstick
In Comparing Tax Burdens
Involves Guess.Work Which Prevents Accur.
acy and Prohibits Fair Results Condemned
for Statistical Use in Favor of Others.


dent wants to know whether taxes
here are too large or too small.
Washington has no inkling Of the
method these experts will choose in
making their comparisons. But great
interest will attach to the method.
In comparing the speed of two au-
tomobiles, the Judge might choose tc
measure the speed by tested speedom-
eters. Or he might measure mile
course and hold stop watch. Or he
might have the automobiles race over
q straightaway course. The method
of comparison would not make any
difference, for the result would be
the same.
But in dealing with comparative
statistics of cities everything, curiously
enough, could depend on the method
of comparison.
And the method which has been
most faulty Of all-espe-
cially when Washington is included in
the comparisons the so-called eval-
uated tax rate, or adjusted tax rate
method OF comparison. 1t is faulty
because it Is not accurate. and 1t Is
not accurate because it deals with un-
known and practically unknowabls
quantities.
The Unreliable, Faulty Method.
The purpose of this article Is to ex-
plain that method and to show why
it is faulty and unreliable.
As everybody knows. the tax rate
Of city, standing alone, is no measure
of the city's tax burden. The tax rate
of city "A" might be $40 q thousand
and the tax rate Of city "B" might be
$40 a thousand. Yet the property
owner in city "A" will pay exactly the
same tax on a $4,000 home that the
property owner of city "B' pays.
Why Is that?
Because the tax assessor Of city "a
follows the practice Cor the law pro-
vides for it, of assessing property fol
taxation at only so per cent of true
or full value, while the as '~sor Of city
"B" follows the practice the 'etically
pun DOoc VI llluSll dIAOklJ VI dooCcS-
ing at 100 per cent full value.
II one adjusted or evaluated the
tax rate Of the two cities, one would
take SO per cent Of the $40 tax rate in
"A" and compare it with the 100 per
cent Of the tax rate of "B." Each city
would be shown with a $50 tax rate.
Everything depends in this compari-
- fN
value in the cities. And the only figure
that can be obtained to represent this
ratio Is the figure that Is reported
by the assessor or by business men
familiar with property or by an ex-
haustive comparison OF assessment,
with actual sales Of property made
under the ideal conditions Of willing
buyer and a willing seller, considering
different types Of property in different
sections of the city.
But the most easily obtained, and
therefore the figure that has been
used In some comparisons Of the past
based ON this method, Is the reported
ratio of assessed to true value. And
that reported figure is nothing but q
guess. and usually a pretty poor one
at that.
Varying Assessment Standards.
Some cities in some OF the States
follow the practice Of assessing prop
erty at low figure and coupling the
assessment with a high tax rate.
Other cities in other States follow the
practice Of assessing property at q
high figure and coupling with it low
tax rate. For as far as the indi-
vidual city is concerned, there is
usually little significance in its ratio
of assessed to full value or its tax rate
The tax rate is merely the figure
which, when applied mathematically
to the assessed valuation figure, will
produce the desired levy. For taxa
ton purposes, 500 Of full value pro-
vided by law may mean anything
from $25 or $50 up, and does show
this diversity in American cities.
The accuracy Of an assessors guess
as to the ratio Of assessed to full value
depends upon the closeness with which
the assessor adheres to the legal ratio
and the closeness with which he ad-
heres to the actual, full valuation OF
property. And it depends upon the
accuracy with which he guesses at the
actual relation of his assessed to full
value.
Ratio Comparisons Condemned.
Assessor Richards, speaking Of this
method recently, said bluntly that it
would be impossible to make q COM
parison of tax burdens by comparing
rates and ratios of assessments.
Addressing the annual banquet OF
the Association Of Oldest Inhabitants
recently, L. A. Carruthers, vice presi-
dent Of the Federation OF Citizens
Associations and q recognized expert
in statistical comparisons Of city tax
burdens, pointed out as some Of the
recent difficulties in comparing tax
rates and assessment ratios as meas
urements of tax burdens: Q) The nu-
merous and drastic changes Of assessed
valuation Of taxable property in many
States and cities, resulting in new and
revised laws on the classification OF
property to be taxed In accordance
with the use to which it Is put: (2)
tax limitations, constitutional or statu-
tory, limiting the rate Of levy which
may be applied; 90 exemption Of tax
alton Of the property Of home owners
up 10 a certain amount; a. the hori-
zontal reduction Of assessed valuations
to conform to the shrinkage in real
estate values; (5) legislation In some
of the States changing the basis OF
assessed to full valle. In some COM
Mr.. Carruthers pointed out
assessments have been kept at pre-
depression levels to protect bonded In.
debtedness based on assessed value Of
property, while in other communities
assessments have been raised because
Of statutory limitations on the rate oi
taxation.
Mr.. Carruthers points out that some
agencies specializing in statistical
financial comparisons in cities have
discontinued the adjusted tax rate
method because Of these and other
difficulties, while others have advised
that no publication of . statistical ma
ture include tax rates, because Of the
unfair and misleading results.
The Faulty Yardstick Applied.
A. m ovopopJo ~ fI,a ras,,lts which