Abstract
This paper examines certain implications from the literature on Tiebout’s model of local government service provision, particularly Hamilton’s extension of the model to include local control of land use and property taxation. Our empirical analysis focused on the use of fiscal zoning to lower property tax rates, a topic that has not been addressed in the extensive literature on Tiebout’s model. Using data for over 100 municipalities in the Miami, Florida, metropolitan area, we specified property tax rates as a function of fiscal zoning measures, other municipal characteristics, and tax mimicking. We conclude that single-family zoning is by far the most important variable explaining municipal property tax rates.
Highlights
This paper presents an empirical analysis of certain implications of Charles Tiebout’s seminal 1956 article, “A pure theory of local expenditures” [1], and subsequent work expanding on Tiebout’s model
Tiebout argued that a system of local governments in a metropolitan area can provide an efficient market for public services by allowing households to choose to live in a municipality that provides an optimal combination of taxes and public services
We analyse over 100 municipalities in the Miami-Fort Lauderdale-West Palm Beach, Florida, Metropolitan Statistical Area, to determine whether property tax rates were a function of factors implied by the literature on Tiebout residential sorting
Summary
This paper presents an empirical analysis of certain implications of Charles Tiebout’s seminal 1956 article, “A pure theory of local expenditures” [1], and subsequent work expanding on Tiebout’s model (a useful review of this work is provided by Oates [2]). Subsequent research—notably by Hamilton [3]—has emphasized the role of property taxes as the price for public services, and for their role in local control of land use as an exclusionary tool that can be used in some circumstances to zone out uses that consume large amounts of services relative to the property taxes they yield. One implication of this is that single-family residential uses may be preferred over multi-family residential uses. We were interested in measuring the impacts of fiscal zoning on property tax rates, a topic that to our knowledge has not previously been addressed in the extensive Tiebout literature
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