Abstract

Owners of vacation homes pay local property taxes, yet cannot vote on local referenda. From the standpoint of full-time residents, signifi cant numbers of vacation homes reduce the real costs of public spending, since vacation home owners pay property taxes but consume very few public services. A one-time change in Minnesota tax assessments of vacation property in 1996 affords the opportunity to identify the effect of vacation property on local spending. The results suggest that a one-percent increase in the concentration of vacation homes in local tax base is associated with a 1.5-percent increase in per-capita spending.

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