Abstract
This is an empirical exploration of tax competition among Florida local governments. We estimate a spatial lag reaction function for property tax rate of Florida municipal governments in 2000 and 2004. The level of ``neighborliness'' is measured as spatial distance between geographical centers of municipalities. The weight matrix excludes the municipalities locating within the same county to eliminate their common responses to higher-tier government property tax policy. By including the property tax rate levied by other local governments (counties, school districts), we find that tax competition exists for property tax among neighboring municipalities (horizontal) as well as between municipalities and other local governments (vertical). The response of municipal governments is negative to county's property tax rate but positive to school district's property tax rate.
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