A recent study from the University of Michigan has found that property wealth is distributed unevenly across cities, towns, and villages within U.S. metropolitan areas, creating significant disparities in local government resources. The research introduces the concept of “tax base fragmentation,” which refers to how the boundaries between municipalities can lead to sharp differences in taxable property wealth from one community to the next.
The team analyzed 138 million property tax records nationwide and found that many metro areas show extreme gaps in property wealth. These gaps are influenced not only by income inequality but also by state laws that allow regions to be divided into many small local governments. According to Robert Manduca, assistant professor of sociology at the University of Michigan and lead author of the study, “the findings show major inequality across hundreds of U.S. metros. In some states, laws allow wealthier areas to form separate municipalities, keeping their property wealth inside small borders rather than sharing it with surrounding communities. This creates big winners and big losers—even in metros that look wealthy overall.”
The researchers developed two new metrics for analyzing these divides and identified certain communities as “municipal tax havens” where property wealth is concentrated, as well as “fiscal deserts” where public resources are limited.
Manduca explained that this fragmentation can protect wealth in some municipalities while increasing financial strain in neighboring ones: “Overall, the study shows that tax base fragmentation is a major—and often overlooked—driver of inequality between communities in the same metro area. It highlights how local boundaries can protect wealth in some places while deepening financial stress in others.”
The full study appears in Socio-Economic Review and was co-authored by Brian Highsmith (UCLA) and Jacob Waggoner (Harvard). An interactive web tool was also created to help users explore fiscal capacity and tax base fragmentation for every municipality across the country.
