New apps that appeal property taxes may hurt municipalities

In popular culture, AI is often personified: Think, Ex Machina, or Her. But most uses of AI are relatively banal. Artificial Intelligence is very good at doing mundane, repetitive tasks humans aren't terribly fond of.

Like taxes.

Specifically, homeowner tax assessment appeals.

If you're a homeowner, you probably aren't always happy with when your home's value gets re-assessed.

But the idea of wading through the process to appeal how much you pay in property taxes probably seems like a bureaucratic nightmare.

So there are now a couple of apps, in the UK and US, at least, that will appeal everything from parking tickets to property assessments, at the tap of a screen.

These so-called "lawyer bots" automatically fill in the required forms and convey them to municipal authorities.

Fantastic, right? Who wouldn't want a reduced tax assessment?

Well, your municipal government, for a start. Especially if you live in a small town, with a part-time mayor and council, and very few administrative staff to handle what may become a flood of appeals if these apps gain popularity.

Property-tax revenue is critically important for municipalities. It makes up a large amount of the money towns use to fund services from snow and garbage removal to maintaining roads, sidewalks and parks. Even if you rent, you benefit from the taxes your landlord pays on the building you live in.

And while it would appear that residents who use these apps to successfully appeal their assessments may just be getting back what they rightfully deserve, it's not really that simple.

Megan Randall is a research analyst in the Urban-Brookings Tax Policy Center at the Urban Institute think tank in Washington, D.C.

Property-tax revenue typically brings in around 30 per cent of a municipalties' funding, which is used to provide services and maintain infrastructure. So if a town starts getting less revunue, it has to make it up somehow, usually by raising the rate at which homeowners are taxed.

So while it's reasonable to think that anyone who successfully appeals their home appraisal is getting money back they shouldn't have been spening in the first place, there's also a question of who has access to the technology.

"Are these high income homeowners who are using these services or are these low income homeowners?"

It's only those folks with the successful appeals that are going to see the potential benefit from the appeals process. So if you're not someone who's going appeal your taxes and you see raising your rates some of that tax burden is going to be redistributed to you," Randall said.

Many municipalities will not be in a position to handle a sudden increase in assessment appeals, she said. This could create additional costs or overwhelm small towns, which don't have the staff to manage the  paperwork on the municipality's side.

It may be that, like many disruptive technologies, use of these apps will eventually be regulated, she said.

"I think all local governments do want to get it right, but they also need to be able to plan ahead of time. And you seeing spikes and appeals and things like that tend to also disrupt the predictability of revenue streams."

Although the apps are only currently available in the UK and parts of the US, it's expected they will be coming to Canada soon.