Your not wrong, just misinformed. The tax assessed value is a broad guess for the purposes of collecting taxes. No one from the government inspects the homes and sees upgrades or deferred maintenance. The local agents track sales on a regular basis and sets listing prices based on the most comparable closed sales in the past 3 to 6 months.
Markets change faster than tax assessors can keep up with them. The assessed value is not what a home is worth, neither is the guestimate on Zillow, here on Trulia or other sites. They are all just approximates.