Property Tax Increase Research Articles

Neoliberal urban segregation and property tax: A critical view of Santiago, Chile

Urban property taxes are primordial land value capture mechanisms that can potentially redistribute public income to underprivileged areas in a city. However, in Santiago, Chile, a city with considerable socio-spatial segregation correlated with significant disparities in municipal budgets, social welfare, and intergenerational reproduction of wealth, the property tax system is weak to address this issue effectively. This study analyses the potential redistributive capacity of property taxes in Greater Santiago, comparing the evolution of real estate surplus values with municipal budgets. These results show that a 2% increase in property taxes would suffice to equalize per capita municipal budgets, essential to redistribute social welfare. In Chiles’s neoliberal planning framework, we argue that weak property taxes are critical for the intergenerational reproduction of wealth and poverty in different municipalities. Property as capital is efficient for capturing unearned value in the long term and obtaining rental income, two mechanisms of inequality reproduction, as property accumulation is only feasible if it is not progressively taxed. In sum, this analysis of property taxes in Santiago contributes to the theoretical understanding of passive mechanisms of inequality reproduction in a neoliberal system and empirical support for a progressive increase of property taxes.

Valparaíso: Touristification and displacement in a UNESCO city

ABSTRACT Tourism has become a sector that is transforming historic areas of the current city. Its impact on the quality of life of communities, local economy, access to affordable housing, urban landscape, is being analyzed from studies on gentrification and touristification. This article analyzes the case of Valparaíso (Chile) and how the declaration of its historic area as a UNESCO World Heritage site in 2003, triggered a process of touristification. Through public programmes and private investment, houses were transformed into tourist shops and hotels, shaping a tourist bubble in these residential areas. How inhabitants felt and experienced the tourist transformation of their neighborhoods was analyzed through the use of interviews. The residents reports material and symbolic changes in their living conditions, which are experienced as pressure by displacement from their neighborhood. A pressure expressed in the loss of privacy, depopulation and loss of community networks, the displacement of neighborhood shops, the increase in property taxes, and the absence of public subsidies to rehabilitate their homes. The results place pressure by displacement as one of the main mechanisms of dispossession in historic areas of Latin American cities and suggest that in cities configured from neoliberal urban policies the UNESCO designation acts as a device that strengthens this dispossession.

Heterogeneity in property tax capitalization: Evidence from municipalities in Wisconsin

AbstractThis article provides evidence that higher property taxes usually decrease property value. On average, a 10% increase in property taxes decreases property value by more than 0.34%. To control for school quality and related sorting, we estimate within‐school‐district property tax impacts. The effective cost of services (driven by appraisal errors or tax code changes), preferences for local services, and the elasticity of supply of housing all play an important role in determining whether property taxes increase or decrease house prices. Locally produced and consumed municipal services such as trash collection are positively capitalized.

Reassessing the Case for Development Charges in Canadian Municipalities

“Growth should pay for growth.” This slogan — the common justification for development charges — is rarely challenged in municipal circles. Development charges evolved from post-1945 subdivision agreements and were initially accepted by most developers as a mechanism for enhancing the likelihood that current residents in a municipality would agree to new development. They now add as much as $135,000 to the cost of a new house in some parts of the Greater Toronto Area. If we wish to lower the cost of housing in our prosperous cities, we must consider reverting to the past practice of having municipalities pay for new infrastructure associated with development. Such a policy — still largely in place in metropolitan Montreal — would lead to increased levels of municipal borrowing and modest increases in property taxes. This report explores the origins of development charges in the United States and Canada, and examines how they have been assessed in the academic literature.

Home rule and municipal revenue stability: New evidence from Texas

AbstractScholars have long debated whether home rule powers help improve municipal financial well‐being; however, a consensus has yet to be reached. This study advances the home rule literature by causally estimating the impact of home rule in Texas on municipal revenue stability. To accomplish this, we employed a difference‐in‐differences estimator coupled with event‐study specifications on a 40‐year‐long panel data set. This approach revealed strong empirical evidence that cities adopting a home rule charter had a significant reduction in the probability of experiencing revenue decline. This finding remained robust with multiple measures of revenue change, an alternative sample, and different model specifications. Moreover, we found that home rule cities’ revenue stability was likely to come from their increase in property taxes.

Predictors of public support for police accreditation

PurposeThis study aims to identify the predictors of public support for police accreditation under four different scenarios that vary based upon whether or not accreditation requires a property tax increase and whether or not local police support accreditation.Design/methodology/approachThis study draws upon survey data from 998 US adults. Four binary logistic models are employed to assess support for accreditation under four different scenarios.FindingsIndividual-level factors, including age, education, race, region, generalized trust, political ideology, and volunteer experience, are important predictors of support for police accreditation depending on the scenario presented. Community-level factors including perceptions of police performance and perceptions of property taxes are also important predictors of support for police accreditation depending on the scenario presented. Support for police accreditation is highest when police accreditation does not require a property tax increase and when local police support accreditation. Sixty-six percent of respondents support police accreditation under this scenario.Originality/valueThis article represents the first published study on the predictors of support for police accreditation. The findings from this study have important implications for implementing police reform given recent calls by activists to both reform the police and to defund them.

Land Value Capture as Financial Resource for Infrastructure Development in Palembang City

Indonesian local governments still depend on the state budget to fund infrastructure development. On the other hand, land value capture (LVC) is suitable for developing countries, such as Indonesia, to fund such development. However, there is an absent legal system to explicitly implement LVC in Indonesia. This paper aims to discuss factors affecting LVC implementation in the context of Palembang. Through an in-depth interview with several experts, the study identified existing issues affecting LVC implementation including delays in revising regulation; risk of corruption, collusion, and nepotism; decrease in public participation; and public complaints due to property tax increase. Finally, we proposed strategies that should be fulfilled by the local government for the successful implementation of LVC in Palembang. They include the establishment of an implementing agency with a clear division of role and skillful members, the enactment of specific regulations, and the establishment of a special forum, e-platform, and mass media.

An Investigation to Explain Structural Racism Associated with Michigan Public Charter Districts Funding Effort

The research objective is to explain evidence of structural racism, inequity, and inadequacy in the Michigan public school finance system related to the education of Black students or Black descendants of captive and enslaved Africans. This analysis stems from ongoing research that integrates transformative paradigms, critical race theory, and school funding fairness to explain systemic racism associated with public school funding policy, practice, and educational disparities. The Constitution of the State of Michigan of 1963, Article 9, Sections 3, 5, 8, 11, and 36 (commonly known as Public Act 145 of 1993 or Proposal A), Michigan’s school funding policy, sought to decrease local property taxes and rid the system of funding inequalities across school districts. The legislation’s intention was to achieve four basic goals: (1) reduce property tax burdens; (2) reduce per pupil funding disparities; (3) limit annual increases in property tax assessments and (4) increase site control over local school district finances. As a result, Proposal A (1993) eliminated local school property taxes due to public outcry regarding increasing rates, resulting in a reduction of nearly $7 billion in funding for Michigan’s public schools, beginning in the 1994–95 school year. Proposal A sought to improve the equalization and equity in funding across school districts. This examination uses the lens of critical race theory (CRT) to analyze Michigan’s Proposal A to understand better the unique interplay among the political, economic, and ideological forces influencing public school finance. CRT explains the inherent inequities due to racial, ethnic, and class lines deeply inserted in U.S. society and the public school system. This investigation presents quantitative evidence from Michigan public school data showing that Black students who receive free and reduced lunch (FRL) are overrepresented in charter districts in Michigan. Although students in these schools require greater resources than their peers to achieve similar academic outcomes, Michigan’s charter districts receive less revenue from state and local sources. As a result, Michigan’s charter financing system reinforces racial and socioeconomic inequality by providing less per-pupil funding to Black and FRL students.

Property Tax Information and Support for School Bond Referenda: Experimental Evidence

AbstractThis article reports on an experiment testing whether additional information influences support for bond referenda. Respondents were randomly assigned to treatment conditions that varied the way the potential implications of property tax increases were presented to voters. The results show a persistent negative effect of tax information on the probability of support for school bond referenda across all treatments. Specifically, the results show that the probability of voting yes decreased by 6 to 9 percentage points, depending on the treatment. This result persists across multiple specifications and robustness tests. The effects are consistent across populations, with only those with high levels of education showing no statistically significant effect of the treatment on their support for school referenda.Evidence for Practice Some states require bond referenda to include statements that seek to make plain the connection between ballot passage and property taxes, while others do not. We find a persistent negative effect of property tax information on the probability of support for school bond referenda of 6 to 9 percentage points, depending on the wording. This line of research has become increasingly important to public policy making given that about half the states, including the largest state, California, have some type of property tax wording requirements for referenda. We argue that providing wording connecting property taxes to bond referenda passage is consistent with transparency efforts governments have pursued for decades. However, such wording might not improve the accuracy of information for citizens since, ultimately, the ensuing property tax levy depends on myriad factors, only one of which is debt service on bonds.

Wither or thrive: Post hoc municipal incorporation outcomes in new cities of color

ABSTRACTBetween 1990 and 2010, 44 new cities of color (CoCs) formed in the United States. Yet what happens after incorporation, particularly in new CoCs that form in impoverished communities? Did these cities meet an untimely demise and dissolve, as some critics predicted, or did the new cities thrive? This research explores four new Black-majority cities in the South, using archival media research to probe the cities’ post hoc incorporation outcomes. The research suggests that these new CoCs faced common challenges, from initial revenue shortfalls to intergovernmental relations. The case studies also reveal that all 4 new cities appear to be thriving, despite challenges initially so severe that, in some cases, they threatened the new cities’ viability. New city formation does appear to hold promise as a social justice tool for communities of color, though a trade-off may exist in the form of property and other tax increases.

Research on the Impacts of Real Estate on Economic Growth: A Theoretical Model-Based Analysis

As the pillar industry of China’s economy, the real estate sector has a significant impact on macroeconomic growth. We assume that the first stage of economic actors’ working lives is a low-income one, while their second stage is a high-income one. Then, relying on an Overlapping-Generations Model, we analyze how, via real estate, the behaviors of different income groups affect the macroeconomy. The results show that when the supply of real estate market fluctuates then this has an impact on economic growth, but the extent of the impact depends on the relationship between the real estate and the consumer markets. We also find that when economic actors more greatly prefer their current situations of well-being, no matter whether there takes place or not a new increase in real estate stocks, a negative correlation will exist in the relation between real estate stocks and their prices. Lastly, we come to the conclusion that increases in property taxes can effectively reduce housing prices, but the impact of transaction taxes on housing prices can still not be determined.

Property values and tax rates near spent nuclear fuel storage

This paper examines potential property value impacts when a nuclear power plant closes and spent fuel remains on site. We confirm earlier research that fails to find an impact on property values of proximity to a nuclear power site. Another contribution of this paper is our finding that a one percentage point increase in property taxes is associated with a 4.31% decrease in the sale price of a home. These results provide evidence for a positive impact of operating nuclear facilities on surrounding communities in the form of reduced residential property taxes for a given level of public expenditures.

What Factors Drive Municipal Fiscal Policy Adoption?: An Empirical Investigation of Major Cities in the United States

Local policy makers operate within a confined decision-making environment and their policy-making capacities are limited by intergovernmental constraints, political culture, service demand, and economic and fiscal condition. This study investigates the effects of these factors on certain types of local fiscal policy adoption in the United States. Based on data from hundred major American cities, the result shows that a combination of state aid, state-imposed local tax and expenditure limits, fiscal decentralization, and tax authority has varied effects on the adoption of fiscal policies such as property tax increases, other tax increases, fees and user charge increases, and personnel cuts.

Proposition 13: An Equilibrium Analysis

There are many federal, state, and local laws that distort housing decisions and prices. However, it is often difficult to tease out the quantitative impact of such policies. In this paper, we examine the implications of one of the most significant tax changes initiated by voters in the United States on house prices, housing turnover, and household welfare. In 1978 California passed Proposition 13, which lowered property tax rates and restricted future property tax increases. We find that the introduction of Proposition 13 leads to a 15 percent increase in house prices and a 3.3 percent decrease in the moving rates. The elimination of Proposition 13, however, leads to modest changes in house prices and mobility but sizable welfare gains. (JEL E13, G21, H71, R21, R31)

The Effect of Property Reassessments on Fiscal Transparency and Government Growth: Evidence from Virginia

An important concern to the efficiency of public finance systems is that voters suffer from various illusions that can politicians can exploit to expand the public sector. This paper contributes evidence of this effect on a public finance system through the revenue elasticity hypothesis, which is a form of fiscal illusion in which voters confuse tax rates with tax burdens in the approval of public spending. The applied empirical setting is Virginia cities and counties from 2001 to 2011, where the timing of mass property reappraisals is exogenous but known to local policymakers in setting the annual budget. The results indicate that mass reappraisals, which reduce tax rates, do cause property tax increases, as do reappraisals that will result in future tax rate increases. These revenue shocks are then smoothed into expenditures through the management of assets, indicating that policymakers prefer the spending to be drawn from future cash reserves rather than from immediate projects that might draw attention to the source of fiscal illusion.

Optimizing expenditures for agricultural land conservation: Spatially-explicit estimation of benefits, budgets, costs and targets

This paper presents an empirical analysis of the optimal use of financial resources for agricultural land conservation in the Alberta Capital Region, Canada. All elements of the analysis are spatially explicit, including estimation of benefits and budgets from a choice experiment with Capital Region residents, assessed farmland value and list price data on conservation costs, and priority targets for conservation. The performance and efficiency of four targeting criteria are evaluated and compared for alternative budgets that are derived from the benefit study, applied to two sets of data on costs. The results show considerable interest in farmland conservation in the Alberta Capital Region: we estimate that a one-time increase in property taxes or rent that would generate $CAD 17.6 million would be acceptable to 75% of the population. Willingness to pay for conservation was highest for land used for commercial vegetable production, located near to primary highways and outside of city limits. However, the difference in willingness to pay to conserve such land generally does not offset the higher costs of that type of land, and efficient use of limited conservation funds would result in the targeting of lower-cost grazing lands located further from the main population centres. As expected, the branch-and-bound optimization (OPT) and benefit-cost ratio targeting (BCRT) provide more efficient use of conservation funds than either benefit targeting (BT) or cost targeting (CT).

Land Value Uplift from Light Rail

Land value gains attributable to the light rail system on the Gold Coast, Australia, are estimated. Using the full history of statutory land valuations of Gold Coast properties, a model of location-specific gains is estimated, allowing for price effects at multiple distances from stations across time. Total value gains to nearby landowners are $300 million, or 25% of the capital cost of the project, This estimate is net of automatic property tax increases of $4.8million in 2015-16. Substantial additional scope to fund transport investment from value gains is apparent.

Individual tax rates and regional tax revenues: a cross-state analysis

ABSTRACTIndividual tax rates and regional tax revenues: a cross-state analysis. Regional Studies. This paper analyzes the effects of state-level personal tax rates on state tax revenue and individual welfare. The policy analysis based on a general equilibrium model suggests that tax revenues would benefit from higher wage–income, sales or property taxes, while any increase in dividend–income tax would result in a reduction of revenues. It is also shown that individuals would suffer from an increase in state-level wage–income tax, dividend tax or sales tax, while they would benefit from an increase in property taxes. The heterogeneity across states is determined by a TaxIndex, a weighted average of initial taxes at the state level.

Proposition 13: An Equilibrium Analysis

There are many federal, state, and local laws that distort housing decisions and prices. However, it is often difficult to tease out the quantitative impact of such policies. In this paper, we examine the implications of one of the most significant tax changes initiated by voters in the United States on house prices, housing turnover, and household welfare. In 1978 California passed Proposition 13, which lowered property tax rates and restricted future property tax increases. We find that, the introduction of Proposition 13 leads to a 15% increase in house prices and a 3.3% decrease in the moving rates. The elimination of Proposition 13, however, leads to modest changes in house prices and mobility but sizable welfare gains.

Homeowners, renters and the political economy of property taxation

Studies find that renters are more supportive of public spending that is financed by the property tax than homeowners, a finding commonly referred to as the “renter effect.” The renter effect suggests that, all else equal, renters should prefer property taxation over other forms of taxation. We test that hypothesis using detailed micro-level survey data that contains voter responses to two key questions: their willingness to pay higher property taxes to fund public services and their willingness to pay higher sales taxes to fund those services. Using a difference-in-differences estimation strategy, we find first that renters are approximately 10 to 18 percentage points more likely than homeowners to favor a property tax increase over a sales tax increase, a finding consistent with the presence of a renter effect. However, these results are not driven by the survey responses of renters. Analysis based on separate regressions for renters and homeowners reveals that renters are indifferent between a property tax increase and either a sales tax or state income tax increase, while homeowners strongly oppose a property tax increase relative to either a sales tax or state income tax increase. Further, the strong opposition among homeowners to the property tax is not eroded by including controls for income and other demographics as might be expected if these differences were driven by economic incentives. Finally, an examination of the variation in tax burden created by Proposition 13 in California shows no evidence that homeowner aversion to the property tax increases with the homeowner's relative tax burden. These findings of homeowner aversion to property taxes are consistent with recent work suggesting that salience matters when voters evaluate taxes, but also suggest that increased salience does not necessarily lead to more careful consideration of individual tax burdens.