Abstract
When the interest rate rises above the penalty rate on delinquent property taxes, taxpayers have an incentive to delay their property tax payments, using their local governments as cheap credit sources. Property tax delinquency as a percent of the tax levy should rise with increases in the interest rate. We test this proposition using delinquency data for 12 large Indiana counties during 1969-86, and find that a rise in the interest rate causes a significant rise in the delinquency rate. We also find that higher unemployment increases delinquency while higher inflation reduces it.
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