Local Property Tax Research Articles

Localized Racism, Legalized Theft, and the Long Dispossession of U.S. Cities

Andrew Kahrl's The Black Tax is a sweeping and insightful history of the local property tax in the United States from Reconstruction onward that speaks eloquently to urban history, tax history, and histories of capitalism and race in the United States. Kahrl exposes the relentless process of dispossession and exploitation, captive taxpayers and fiscal apartheid within the local property tax that has overtaxed Black Americans by over $275 billion, cost $326 billion in land loss, and created a generational wealth difference compounded into trillions. But Kahrl is not focused only on individual loss or even community dispossession, but on entrenched systems of legalized theft built into the local property tax that have reinforced themselves over time through the most localized bureaucratic subjectivity and bias, such that poor cities are now left with few fiscally sustaining options other than preying on their poorest citizens.

The Origins of a Fiscal Outlier: The Abandonment of a Federal VAT in the Nixon Presidency

Abstract Richard Nixon was the first president who examined the possibility of introducing a value-added tax (VAT) at the federal level in the late twentieth century. By 1970, his administration had considered recommending it alongside other domestic programs to overcome the criticism against the VAT’s regressivity, potential conflict in the federal–state tax authority, and the fragmented decision-making authority between the executive and legislative branches of the government. However, in 1971, the Nixon administration shifted their policy priority toward gaining the middle-class political support by linking local property tax relief to a federal VAT. Although they combined the two measures with a rebate to obtain consent to and confidence in them from the “opponents” among the “internalists” of policymaking and societal actors, their attempt failed to accomplish it. As a result, Nixon abandoned the federal VAT. This abandonment was a missed opportunity to introduce a federal VAT, leading the United States to become a fiscal outlier among Organisation for Economic Co-operation and Development (OECD) countries: it has not yet implemented a national/federal VAT. Furthermore, this outcome marked the origin of certain historical characteristics of the American fiscal state: the use of tax expenditures, “fend-for-yourself federalism,” weak extractive capacity, and fiscal inflexibility.

Modeling method of local financial dependence: Evidence from Mongolia

Many countries have been striving to equalize the balance between the central government and sub-government financial disparities without considering political interference. This paper aims to summarize the theory of local financial federalism and propose an unprecedented model for identifying the factors that affect local financial dependence. The proposed model is based on a theoretical framework incorporating five assumptions and is applied through panel regression analysis. Utilizing panel data from 2013 to 2022 in 21 provinces of Mongolia, a total of nine variables have been identified and econometrically tested within the proposed model. The findings from the panel regression analysis reveal that local budget investment, local personal income tax, local property tax, and other local taxes positively impact the reduction of local financial dependence. However, it is observed that an increase in local budget expenditures and GDP leads to an escalation in local financial dependence.

Busting Myths

Andrew Kahrl's timely book, The Black Tax, examines the racial disparities present in local governmental property tax systems. By examining the property tax regime, he enters the conversation about the role of tax policy in exacerbating the racial wealth gap. The Black Tax expands the conversation about analyzing tax policies through a racialized lens.

The Politics of School Funding: How State Political Ideology is Associated With the Allocation of Revenue to School Districts

States diverge widely when it comes to education funding choices, leading to substantial differences in how much states spend on schooling, the role of local versus state revenue sources, and relative differences among districts in funding levels. Prior studies have documented that Democratic party control of state governments appears to be associated with higher levels of spending on K-12 education, but beyond that we know little about how political ideology is related to patterns of education funding allocation by states. This study examines this question using a nationwide dataset of school district expenditures from 1999 to 2015. The results indicate that states that are more politically liberal tend to provide more funds (per pupil) to local districts. More liberal states also provide relatively more favorable distributions to districts that are more urban and have larger Black student populations, in addition to perhaps rewarding districts with higher local property tax rates.

The Roots of Inequality: Texas School Politics and the Leadup to Rodriguez

AbstractContrary to Supreme Court Justice Lewis F. Powell’s majority opinion in San Antonio Independent School District v. Rodriguez (1973), Texas’s school finance system was the result of years of legislation and state-building that gave some areas the resources and capacity to provide more educational opportunities than others. As this article demonstrates, during the century leading up to the Rodriguez decision, Texas political leaders developed a public school funding system reliant on the highly unequal spatial distribution of property wealth across rural/urban, class, and racial lines. There was nothing inevitable about this. In fact, the history of Texas’s system reveals four pivotal eras when the state’s White leaders created and maintained a school finance system reliant on local property taxes and defined by rural/urban and racial differences that cemented deep inequalities. This case study traces those changes over time and brings part of the story to life through the example of Kirbyville, Texas, and its struggle to finance a new White high school. Returning to the historical roots of school financing in Texas reveals how rural/urban, racial, and wealth inequalities have been foundational to Texas’s public school finance system.

Partisanship and Property Tax Redistribution: Evidence From Repealing Colorado's Gallagher Amendment

In November 2020, Colorado voters were asked to repeal the state's Gallagher Amendment, a constitutional redistributive policy in effect since 1983 that shifted the local property tax burden away from residential property on to nonresidential property. This study explores how partisanship predicts support for repealing Gallagher. Republican and Democrat platforms both entail sociotropic messages to support repeal, but following through on these political ideals carries a salient and nontrivial pocketbook cost to residential property owners. If voters aligned with one party or another are more likely to support repeal, it follows that these voters are more willing to put their money where their mouth is, so to speak. Using election precinct voting data, I find that Democrat-leaning voters were more likely to support repeal than otherwise similar Republican-leaning voters.

The effect of property taxes on businesses: Evidence from a dynamic regression discontinuity approach

We employ a dynamic regression discontinuity design comparing business outcomes in areas that passed additional school property taxes to business outcomes in areas that failed to do so. On average, these referenda increase local property taxes by approximately 8 percent. We find little evidence that passage of a property tax referendum influences the total number of establishments in the district in the following years. Further, there is little evidence that property taxes affect total establishment births or deaths. Heterogeneity analysis does not find differences across various measures of firm exposure to property taxes.

The Effects of Fiscal Decentralisation on Publicly Provided Services and Labour Market.

This paper studies how fiscal decentralization affects local services. It explores a 1993 reform that increased the fiscal autonomy of Italian municipalities by replacing government transfers with revenues from a local property tax. Our identification leverages cross-municipal variation in the degree of decentralization that stems from differences in the average age of buildings caused by bombings during WWII. Decentralization reduced local spending but expanded municipal services, such as nursery schools. These effects are larger in areas with greater political competition. The paper also investigates how the reform affected labor markets. Decentralization increased female labor supply-probably through expanded availability of nursery schools- thereby reducing the gender gap in employment.

Summaries of Articles

Summaries of Articles

Does land conservation raise property taxes? Evidence from New England cities and towns

Protected lands provide high ecological and social value, yet a perception that land protection erodes local property tax bases and shifts tax burdens to other owners creates barriers for new protection. We investigate the impact of land protection on local property tax rates using panel data from more than 1400 towns and cities in New England between 1990 and 2015, including both ownership and easement-based protection. We find that on average, new protection results in a small increase in annual tax rates, with an expected change of $0.0231 per $1000 of value for a 1 percentage point increase in the percent of municipal area protected. This corresponds to an increase in a homeowner's annual property tax bill of $1.16 per $100,000 of value for 100 acres of new land protection. We do not find that taxes continue to increase over time or reduce municipal expenditures. However, for towns that are growing slowly, have lower household incomes, or use municipal land protection, we estimate greater tax bill increases of up to $10 for each $100,000 of value. These results provide evidence that land protection does not have a substantial impact on property taxes, but also highlight the importance of maintaining and expanding public compensation mechanisms, such as payments in lieu of taxes, where expected burdens from new protection may be greater.

Residential land owner type mediates the connections among vacancy, overgrown vegetation, and equity

Attributes of property parcel owners are hypothesized to impact land management outcomes, because different types of owners are likely to have different capacities and motivations for land stewardship. We used emerging data resources to examine how owner type relates to the prevalence of overgrown vegetation in Toledo, Ohio, and Trenton, New Jersey, USA. Overgrown vegetation was characterized at the property parcel scale using data from comprehensive parcel surveys in each city, and owner attributes were categorized using local property tax databases. We categorized owners into types (e.g., individuals, investors, nonprofits), classified owners as local or non-local, and determined whether or not parcels were owner-occupied. Then we tested for differences in rates of overgrown vegetation across owner types using inferential statistics including chi-squared tests and autologistic regression. Individual owners had lower rates of overgrown vegetation than other owner types. Neighborhood context was also important, as overgrown lawns were more prevalent in high-vacancy areas. Among parcels owned by individuals, overgrown vegetation was less prevalent when the owner resided locally, and when the property was owner-occupied. This study advances our understanding of social-ecological outcomes in US shrinking cities by exploring how land ownership is related to vegetation management in ways that can dictate whether vegetation is serving as an amenity to the community. These findings may help promote desirable social-ecological outcomes and lead to more equitable futures in high-vacancy neighborhoods. Specifically, our results point to more equitable vegetation outcomes when parcels are owned by individuals, and particularly owners who reside on-site or locally.

Designing and implementing a local residential property tax from scratch: lessons from the Republic of Ireland

Assigning recurrent taxes on immovable property to cities, municipalities, and rural districts is a common practice around the world. The Republic of Ireland is no different, with its annual taxes on real property assigned to local government. Following the 2008 financial crisis and the austerity era that ensued, Ireland’s property taxes underwent major reform, most notably the design and implementation of a new residential property tax 35 years after abolition of the previous system of ‘rates’ on residential properties. In this paper the new or different features of Ireland’s residential property tax are outlined, including the use of self-assessment and valuation bands, innovative payment methods and also the multiple compliance mechanisms for taxpayers. While recognising the importance of country-specific and local circumstances in property tax design, the paper concludes that elements of Ireland’s new residential property tax have potential lessons for other jurisdictions contemplating similar tax reform. These relate to the key tax principles of simplicity and public acceptability, and on specific design features of assessment and valuation, and collection and compliance.

“WE WANT TO PAY AND WE WANT TO STAY”: OLDER ADULTS MANAGING PROPERTY TAX BURDEN IN A GROWING URBAN COUNTY

Abstract Aging in place is a goal for many older adults. As many older adults own their homes, strategies designed to promote aging in place must account for threats to the financial sustainability of ownership and occupancy later in life. One such threat is property taxes, which have risen substantially in many metropolitan areas over the last decade as home values soar. Property tax relief programs offered by state and local governments are designed to ease the housing cost burden of older adults. Yet, recent research indicates that such programs do little to ensure affordability for low-income homeowners. This study reviewed local property tax relief programs and interviewed local older adult homeowners and housing professionals to understand the circumstances of older adult homeowners in one growing U.S. County. Four major themes emerged from the interviews: housing market dynamics, personal finances, local housing resources, and wellbeing. Results indicate that unaffordability is a growing concern among older adult homeowners and services providers alike. Current property tax relief programs are thought to do little to reduce the cost burden posed by property taxes. Implications for social policy include expanding eligibility criteria and indexing the benefit to a local economic metric so that the relief remains relevant in areas with dynamic markets. Implications for practitioners include understanding the property tax relief programs in one’s area and referring clients when appropriate.

Majority choice of taxation and redistribution in a federation

To study redistribution and taxation in a federation, we provide a model with a central government and multiple local governments, the former with power to levy an income tax for redistribution, and the latter choosing a local income tax, property tax, lump-sum tax or subsidy, and a local public good. Policy is set by majority choice at each tier of government by households that differ by income and by ability to move among local jurisdictions. We provide sufficient conditions for existence of equilibrium and examine its properties. Central findings are federal income distribution, little local redistribution, and local preference for property taxation over income taxation to fund local public goods.

A review of Ireland’s Local Property Tax

Abstract Property taxes are common in countries around the world. Until recently, Ireland was an exception as there was no annual tax on residential property. This paper is a review of the Local Property Tax (LPT) system that was introduced in 2013 and had its first property revaluations in 2021. Using the lens of municipal finance and tax assignment, the rationale, history, features and administration of this new residential property tax are outlined. While recognising country-specific circumstances, lessons, opportunities and challenges are explored with a view to future improvements in the design and implementation of the LPT. Lessons from the LPT experience are the importance of tax administration and the role of the central tax collection agency, and, in terms of design, the need for a tailored approach to suit local circumstances. Challenges include the rates/LPT mix and the relative tax burdens on non-residential and residential properties, the long-term sustainability of the LPT arising from design issues, the current low tax rate and future revaluations, and, finally, the need for regular property tax reform because of political and taxpayers’ opposition to a highly visible, unpopular but good local tax.

The geography of US homeownership tax expenditures

US homeowners receive income tax deductions for mortgage interest payments and state and local property taxes, pay no income tax on their home's imputed rental income, and may exclude most of the capital gains earned from a home sale. This paper characterizes the geographic distribution of the tax expenditures from these tax preferences using a new method that exploits household-level microdata from the 2019 Census Public Use Microdata Sample to simulate homeownership tax expenditures at the Public Use Microdata Area level. I estimate that in the 2018 tax year, $226.05 billion in taxable revenue was lost to the mortgage interest deduction ($28.20 billion), the property tax deduction ($9.51 billion), the exclusion of net imputed rental income ($134.82 billion), and the partial exclusion of housing-related capital gains ($53.52 billion). Large metropolitan areas and neighborhoods with high housing prices receive subsidies in excess of the cost of funding homeowner tax preferences, while the burden of homeowner tax preferences falls heavily on rural areas. If federal income tax law reverted to what existed just prior to the 2017 Tax Cuts and Jobs Act, these geographic disparities would be exacerbated.

The impact of preferential farmland taxation on local public finances

Preferential taxation of farmland, which typically takes the form of use-value assessment (UVA), is a staple of local property tax systems in the United States. Under UVA, farmland is taxed according to its hypothetical value in permanent agricultural use, as opposed to its full market value, which may include capitalized future development returns that have yet to be realized by the landowner. A common criticism of UVA is that the preferential tax treatment of farmland adversely affects local property tax revenues, with other landowners footing the bill. We leverage the staggered timing of UVA adoption across states to estimate how these policies have affected various sources of local government revenue. Results broadly indicate that UVA adoption led to net reductions in property tax revenue, which were offset by transfers from state to local governments. At the state level, we find suggestive evidence that transfers were funded through increases in state-levied tax revenues, including sales taxes and corporate income tax rates, and reductions in state highway spending.

Public Education Inequality and Intergenerational Mobility

Public school funding depends heavily on local property tax revenue. Consequently, low-income households have limited access to quality education in neighborhoods with high house prices. In a dynamic life-cycle model with neighborhood choice and endogenous local school quality, we show that this property tax funding mechanism reduces intergenerational mobility and accounts for the spatial correlation between house prices and mobility. A housing voucher experiment improves access to schools, with benefits that can last for multiple generations. Additionally, a policy that redistributes property tax revenues equally across schools improves mobility and welfare. However, the benefits can take generations to be realized. (JEL H71, H75, I21, I22, J62, R23, R31)

Systemic And Structural Racism: Definitions, Examples, Health Damages, And Approaches To Dismantling.

Racism is not always conscious, explicit, or readily visible-often it is systemic and structural. Systemic and structural racism are forms of racism that are pervasively and deeply embedded in systems, laws, written or unwritten policies, and entrenched practices and beliefs that produce, condone, and perpetuate widespread unfair treatment and oppression of people of color, with adverse health consequences. Examples include residential segregation, unfair lending practices and other barriers to home ownership and accumulating wealth, schools' dependence on local property taxes, environmental injustice, biased policing and sentencing of men and boys of color, and voter suppression policies. This article defines systemic and structural racism, using examples; explains how they damage health through many causal pathways; and suggests approaches to dismantling them. Because systemic and structural racism permeate all sectors and areas, addressing them will require mutually reinforcing actions in multiple sectors and places; acknowledging their existence is a crucial first step.