It’s Time for Cities and Counties to Get Smart About Property Taxes

Introduction

  • Inevitably, some people don’t pay their fair share, and that means less money for vital public services such as schools, courts, fire departments, and infrastructure. Meanwhile, some people — often those who can least afford it — pay more than they should.
  • We need a smarter approach. Using advances in data science, data accessibility, and machine learning, we can help local governments manage their tax roll accuracy. If we can get this right, we’ll see millions of dollars more flowing into local budgets, less time wasted on complex tax management, and more engaged and equitable relationships with residents.

Part 1: A Better Way

  • The status quo isn’t working. Jurisdictions lack the manpower to efficiently track progressive tax programs like homestead exemptions. Manually looking for fraud, and performing expensive periodic audits can’t keep pace with changes in people’s living situations and eligibility. Sales, rentals, moves, divorces, deaths, etc., don’t happen only every 3–6 years; neither should tax roll audits.
  • The solution: use new data science innovations and AI to glean insights from the vast amounts of data that’s now publicly available. Stop searching for a needle in a haystack, and start using a magnet to surface the anomalies that need human attention.
  • We started TrueRoll to assemble dedicated data sets to meet the specific needs of municipal property tax teams. Instead of piggybacking on data sets from large, multi-national data providers , we draw on data specific for the use case: ranging from Airbnb rental listings to other states’ property tax records to identify ineligible homestead exemption claims.
  • Now let’s look at the benefits that brings for your city, your teams, and your residents…

Part 2: Increase Revenues

  • The biggest driver of ROI for municipalities that switch to automated, AI-enabled tax-roll management is simply the new revenues that they can draw in by eliminating hundreds-of-millions of dollars in ineligible homestead exemption benefits.
  • Cook County residents, for instance, currently claim 1.1 million homestead exemptions. That reduces Chicagoland’s annual tax revenues by between $500 million and $1 billion — and until recently, that enormous discount was issued without a rigorous automated oversight process.
  • Florida Department of Revenue publishes an annual report describing over +$500B in taxable value granted in the form of primary-residence based exemptions.
  • We’ve found that between 1% and 4% of exemptions are typically non-compliant (going to deceased individuals, non-primary residents, duplicate homes, etc), depending on the maturity of a city’s existing audit process. Even based on a conservative, lowball estimate, that adds up to big savings: if Chicago has $500 million in exemptions, a 2% reduction due to newly discovered ineligible exemptions could yield $10 million in additional tax revenues annually.

Part 3: Drive Equity

  • Increased tax revenues mean more cash for vital government services that help vulnerable or disadvantaged residents. But that isn’t the only driver of increased social equity.
  • By definition, people who are unqualified for homestead exemptions are likely to be those with the means to have a second residence or to own a rental property. That means the additional revenues you raise by creating a smarter tax-roll will accrue to the people who can most afford to pay their fair share.
  • By contrast, people from lower socioeconomic tiers are less likely to be getting good advice about how to claim exemptions. Because automated systems also identify unclaimed exemptions, you can proactively help disadvantaged residents to claim exemptions and reduce their tax bills — even while you increase overall tax receipts.
  • The results can be dramatic: we’ve found several homes that are on tax-sale foreclosure lists, but where unpaid taxes are less than the amount of unclaimed exemptions. With a smart tax-roll system, Local governments can help residents to stay in their homes, and give hard-working residents the help they need.

Part 4: Engage Residents

  • Property taxation shouldn’t be adversarial. We’ve found that most people who apply for exemptions are genuinely qualified for them — it’s just that over time their circumstances change, and they forget or fail to realize they’re supposed to notify the county assessor / appraiser / auditor.
  • The current system can be punitive. For instance, Florida residents can face a 50% penalty on up to 10 years’ worth of back-taxes, plus compounded interest at 15%, leaving them facing enormous bills for exemptions they didn’t realize they were no longer eligible for.
  • Such problems are inevitable when you only audit tax rolls periodically. But a more proactive, pro-citizen system lets you monitor exemptions in real-time, and communicate rapidly with residents if their eligibility lapses. The result: tax bills get paid correctly in real time, and residents get government services provided in a spirit of partnership, with the same efficiency and accountability they’ve grown to expect from private-sector companies.

Conclusion

TrueRoll Explainer Video

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Entrepreneur, Adventurer, Local Government Advisor

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Tyler Masterson

Tyler Masterson

Entrepreneur, Adventurer, Local Government Advisor

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