Left‐digit bias in property taxes

Abstract This article investigates whether homebuyers display a form of cognitive bias called left digit bias when it comes to future property taxes. Using a regression discontinuity method, and under both hedonic and repeat‐sales estimations, homes with property tax obligations that are just under a $1000 threshold are shown to sell for 0.5% more than other equivalent homes. This type of cognitive error results in an average overpayment of $1650. Results are larger for single‐family homes. Neither market conditions nor property tax growth rates change the left‐digit bias estimates. There is also evidence of additional left‐digit bias with respect to the assessed value.