Does the Acquisition System of Property Taxation Increase Neighborhood Social Capital?

Abstract

Acquisition systems of property taxation can lead individuals who just bought a home to pay five times more property taxes than neighbors who own comparable homes (Nordlinger v. Hahn). These large inequities seem to violate the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution. However, the U.S. Supreme Court has ruled such inequities constitutional, because they serve the legitimate state interest of encouraging neighborhood preservation. In this paper we examine whether acquisition systems of property taxation increase neighborhood specific social capital investments; specifically, whether they increase the likelihood that parents put their elementary school children in public school and carpool. We find no evidence in support of this hypothesis. On the contrary, we find that households that benefit from lower taxes are less likely to send their children to public elementary schools and to carpool.