Local Property Tax Research Articles

ВПЛИВ ПОДАТКОВИХ ІНСТРУМЕНТІВ ФІСКАЛЬНОГО ФЕДЕРАЛІЗМУ НА СОЦІАЛЬНО-ЕКОНОМІЧНИЙ РОЗВИТОК ТЕРИТОРІАЛЬНИХ ГРОМАД

Anthropological values in the modern local economic development conduct to the rationalization of intellectual abilities in the focus of decision-making to expand the financial resources of united territorial communities. The article examines the current processes of financial support for the functioning of newly created administrative-territorial units during the decentralization reform. Elements of fiscal potential of territories are systematized, among which the main role belongs to tax revenues. The dynamics of revenues to local budgets in Ukraine is analyzed and the dependence of community budgets on such state regulatory instruments as subventions and dotations is established. Emphasis is placed on strengthening the budgetary autonomy of local governments on the principles of fiscal federalism, which are extensively used in the unitary states of the world. This approach will improve social standards and infrastructural development of local communities. Considerable attention is paid to the study of the role of local (property) taxes in stabilizing the financing of priority needs of the population of territorial communities. It is established that an extensively fiscal resource in the economic development of the regions of Ukraine is the real estate tax. This aspect is confirmed by foreign experience. Forecasting of real estate tax revenues other than land to the budget of the Ternopil City Territorial Community has been made. The forecast was based on two tax rates (1% and 1,5%). In the article is determined that the fiscal role of real estate tax, other than land in the structure of local taxes and fees of Ukraine is insignificant. The peculiarities of the post- war development of the economy of the united territorial communities in Ukraine on the basis of tax instruments of fiscal federalism are outlined.

Local Property Tax Reform and Municipality Spending Efficiency

Local Property Tax Reform and Municipality Spending Efficiency

Higher Taxes for Fiscal Consolidation? Expected and Unexpected Effects of Municipal Tax Policy

During episodes of fiscal consolidation in public budgets, there are different instruments to choose from. The literature shows broad consensus that expenditure cuts are preferred, whereas tax increases tend not to support the fiscal aim. The paper examines instruments for fiscal consolidation at the municipal level in Germany presenting theoretical and empirical findings in favor of revenue-based instruments, focusing on the case of municipalities in the Free State of Saxony. German municipalities can autonomously control several positions on both the expenditure side and the revenue side. Options for expenditure cuts are given both for voluntary and compulsory tasks. On the revenue side, municipalities have the opportunity to set assessment rates on both local trade taxes and property taxes. For this part of the consolidation process, the prevailing opinion is that higher taxes are offset by lower grants, which is not the case in reality. Nevertheless, there are cannibalization effects to consider that may induce primary effects in the short and medium term. Hence, the paper shows an updated view of the drawbacks and opportunities of revenue-based fiscal consolidation. The paper provides evidence for an economic and political discussion that predominantly focuses strongly on the harmful effects of tax increases on the economy.

Sports facilities and the local property tax base in recovery

AbstractThis study considers if major league sports facilities help the property tax base in their vicinity recover from recession. The Great Recession is treated as an exogenous shock to the property tax base, and proximity to three facilities in Los Angeles County, California is used to predict the speed at which nearby properties’ taxable assessed value recovers. California is a useful context because state law provides a consistent and uncontroversial way to measure property tax base recovery. Using parcel‐level data from 2006 through 2019 for properties within 3 miles of the Staples Center, Dodger Stadium, and Dignity Health Sports Park, only proximity to Dodger Stadium impacts recovery speed. The results indicate that an average property a mile closer to the stadium recovers in 87% of the time an otherwise similar property a mile further away does, a finding that is robust to placebo. The study’s implications are discussed.

Fiscal Federalism and Economic Crises in the United States: Lessons from the COVID-19 Pandemic and Great Recession.

The architecture of fiscal federalism in the United States represents an obstacle for prompt and comprehensive policy responses to economic crises, especially by subnational levels of government. As both a public health and economic crisis, the COVID-19 pandemic has put unique fiscal pressures on subnational governments. This article reviews the pandemic’s fiscal effects on these governments, as well as the federal government’s response. By comparing the response to the COVID-19 crisis during the Trump administration with the response to the Great Recession during the Obama administration, we show that while the speed and magnitude of federal aid was unprecedented in 2020, it was nevertheless conditional in nature and beset by familiar political and institutional obstacles. Despite major fiscal pressures, state revenues rebounded earlier than expected, in part due to the relaxation of public health measures and the collection of taxes from online transactions; yet, state resources remained strained throughout the year, especially in states reliant on the hospitality and the oil sectors. And while local property taxes were buoyed by a surging housing market, cities and counties were confronted with declining revenue from other sources and intense emergency spending needs. Thus, despite unprecedented levels of federal support for state and local governments, the legacies of “fend for yourself” federalism live on.

Does the Strength of Incentives Matter for Elected Officials? A Look at Tax Collectors

Abstract In Pennsylvania local property taxes are collected by elected officials, known as tax collectors, whose compensation varies widely in both structure and level across municipalities. This paper analyses the existence of a pay-performance relationship for these officials. Using data on the percentage of property taxes that are actually collected at the municipal level, the paper finds that as the compensation tax collectors receive goes up, they collect more in taxes. This relationship is however true only for collectors who are compensated on a commission basis and not for collectors compensated on the basis of a flat salary.

The Intersectionality of Educating Black Students in Michigan: Public School Finance, Racial Segregation, and Housing Policy

This research applies critical race theory to investigate Michigan’s system for funding public schools, focusing on structural racism and discrimination embedded in education finance laws, housing policies, and residential and educational segregation. We find that the average Black student receiving free or reduced-price lunch (FRL) receives $411 less per pupil per year than the average White student receiving FRL and $783 less than the average White student who does not receive FRL. These disparities stem entirely from differences in locally sourced district revenues that are the result of vast differences in Black-White property wealth. On average, a one-percentage-point increase in a district’s proportion of Black students receiving FRL is associated with a $2,354 decrease in taxable value of property per pupil. Our analyses imply that a district enrolling 1,000 Black and FRL students would receive $1,364,000 less annually than an identically sized district with no Black or FRL students. This funding is sufficient to hire 21 additional teachers or to improve salaries, a proven method of improving the number and quality of applicants and retaining quality instructors. Through its continued reliance on local property taxation, the school finance system in Michigan is yet another example of how laws and policies reinforce structural racism and discrimination against Black students. Along with the research literature showing racism’s historical and continuing impacts on Black-White property wealth disparities, this study discerns a self-reinforcing system that relegates Blacks to a subordinate socioeconomic status regarding school finance, segregation and housing policy, and discrimination.

Property tax capitalization, a case study of Dallas County

We estimate the degree to which local property taxes are capitalized into house prices using administrative data from the Dallas Central Appraisal District (DCAD) from 2014 to 2016. Capitalization rates are measured using a hedonic price regression model. To control for unobservable neighborhood characteristics, we employ a border discontinuity research design, restricting our sample to homes within half-mile blocks of jurisdictional boundaries. With respect to school district taxes, we estimate that more than 70 percent of the increase in the present value of property tax liabilities resulting from a tax increase is capitalized into current house prices. The null hypothesis of full capitalization cannot be rejected. For city taxes, capitalization rates are even larger. We also estimate the willingness to pay for public schools, finding that a one standard deviation increase in test scores results in a roughly four-percent increase in house prices.

Stimuli contributing to local property taxation – with the focus on spatial effects of industry and functional urban areas

Abstract In this study, we argue that a historical background of the region matters in tax mimicking and yardstick competition as a matter of principle. We seek to determine factors supporting the policy of the high local property tax in the Czech Republic. Based on the statistical and spatial data of 6,258 municipalities between 2009 and 2019, the results show that the municipalities burdened by large industrial facilities, as well as municipalities in the functional urban areas (FUAs), apply the policy of higher property taxation twice frequently than the rest. On the other hand, the industrial stimuli keep enfeebling after 2010, and the number of local governments preferring high property taxation is variegated across different FUAs. The causal analysis based on Granger's approach concludes an existence of cumulative effects of both industry and the FUAs, which push the municipalities with large industrial facilities located within an FUA to increase the property taxes. From the mimicking point of view, we found that mimicking policy is an important phenomenon among the municipalities of Czech Republic; however, it has different impacts on both stimuli (Industry and FUA). The analysis suggests that it rather incites the municipalities within the FUA to increase the local property taxes.

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.

State fiscal constraint and local overrides: a regression discontinuity design estimation of the fiscal effects

Despite abundant evidence regarding the influence of US state-imposed tax and expenditure limitations on local governments, the causes and consequences of local overrides remain largely unexplored. This article comprehensively examines the fiscal effects of local overrides of Massachusetts’s state-enforced property tax limit. Existing evidence has shown that pressure from powerful local interest groups, such as public schoolteachers and public employees, is crucial for determining agenda-setting and the successes or failures of measures overriding the statewide property tax limit. In that sense, fiscal constraints are able to curb bureaucrats’ budget-maximizing behaviors. Empirically, a regression discontinuity design estimation shows that local property tax limit overrides increase local property taxes and total revenues, decentralize the state–local fiscal relationship, and improve local budgetary balance. However, overrides do not affect local government spending.

The revenue and base effects of local tax hikes: evidence from a quasi-experiment

Due to a reform of the local equalization scheme in 2003, a set of municipalities in the German state of North Rhine-Westphalia (NRW) increased their local property and business tax rates by one to two percentage points, while the remaining municipalities kept their rates constant. I use this variation across municipalities and over time to study the revenue and base effects of local property and business tax hikes in a generalized difference-in-differences design. The results suggest that the property tax hikes had even in the long-run a revenue elasticity of unity. Accordingly, I find no adverse effects on property tax bases. For the business tax, I find no significant effects on revenues and bases. Furthermore, there are also no effects on broader economic outcomes such as local employment, firms’ wage bill, and property prices. Overall, increasing local tax rates by one to two percentage points does not seem to affect the local economy adversely.

The effect of local taxes on firm performance: Evidence from geo‐referenced data

AbstractThis paper investigates the effect of local property tax for businesses on firm performance by using a panel of Italian manufacturing firms. To identify this effect, we implement a pairwise spatial‐differenced estimator and exploit the exogenous variation in local property tax rates caused by the political alignment of local and central governments. We find that business property taxation has a sizeable negative impact on equipment, the more volatile part of tangible assets, employment, and value‐added. We interpret these results as evidence of a distortionary mechanism. When heavy equipment are included in the business property tax base, as was the case in Italy during our estimation period, business property taxation depresses investment and induces firms to also reduce output and downsize.

Social Construction and the Progressivity of Local Tax Relief

This paper reveals a noticeable difference between a high degree of progressivity of incomerelated local property tax relief versus the proportional or regressive incidence of recognition tax relief. Recognition tax relief is tax relief given to specified social sectors which recognizes either their contributions to society or their identity-related suffering. Social groups that are characterized by political power and positive image following social construction process are expected to receive more favorable tax treatment regardless of their material needs. This study advances our understanding by showing that the degree of progressiveness of a tax system is shaped by social construction which implies a more complex trade-off between equality, efficiency and social construction in designing the tax system.

Local Initiatives to Fund Services for Elders: Increased Community Recognition of the Importance of Social Care

Despite the growing number of older adults in the U.S., federal and state funding for non-medical supportive services remains limited. Recent work reports that states with a more generous supply of supportive services, including home delivered meals and personal care, have fewer low care residents in nursing homes. To boost this supply, some local communities across the nation are exploring alternative funding sources. Our review found 400 local communities across 15 states using voter-approved local revenue streams to fund aging services, such as property tax levies and payroll and sales taxes, and that this strategy has been politically popular. In this paper we provide results from the first national survey of these local communities. Study results found considerable variation by state in number and scope of local initiatives, with Ohio and Michigan each reporting about 70 communities with local property tax levies, while California and Washington had only one community each using this approach. Local programs ranged in size from generating less than $25,000 in annual revenue to more than $35 million. The organizational structure for these programs, and the administrative approaches, such as the use of care managers, varied by state and community. Programs provided an array of services, but typically included traditional social care services such as home delivered meals, homemaker/personal care, transportation, and home emergency response systems. Criteria for program participation also varied, but most were targeted to serve older adults with disability who did not meet Medicaid financial or functional eligibility criteria.

Age-based property tax exemptions

Many local jurisdictions offer property tax exemptions or similar concessions to older citizens. Such exemptions represent substantial intergenerational transfers and may have important implications for local public finances. The consequences of age-based property tax exemptions depend upon the extent to which they influence households' location decisions, housing tenure decisions, and housing consumption. We provide the first evidence on (long-term) changes in household composition and housing consumption attributable to local, age-based property tax exemptions. We construct a unique database of local property tax exemptions in Georgia covering 100 years of county, school district, and selected city property tax laws. We use these data to estimate the effect of age-based property tax exemptions on the number of older homeowners from 1970–2010 attributable to the exemption. Using a "quadruple-difference" estimation strategy, we find a significant increase in older homeowners attributable to the combined effect of age-based property tax exemptions on location decisions and housing tenure. We also find evidence that age-based property tax exemptions increase housing consumption among older households. Finally, we estimate a sorting model to estimate the equilibrium effects of different tax policies.

On the Desiderata for Online Altruism

Online donation platforms help equalize access to opportunity and funding in cases where inequalities exist. In the context of public school education in the United States, for instance, financial inequalities have been shown to be reflected in the educational system, since schools are primarily funded through local property taxes. In response, private charitable donation platforms such as DonorsChoose.org have emerged seeking to alleviate systemic inequalities. Yet, the question remains of how effective these platforms are in redressing existing funding inequalities across school districts. Our analysis of donation data from DonorsChoose shows that such platforms may in fact be ineffective in mitigating existing inequalities or may even exacerbate them. In this paper, we explore how online educational charities could direct more funding towards more impoverished schools without compromising their donors' freedom of choice with respect to donation targets. Seeking to answer this question, we draw on the line of work on choice architectures in behavioral economics and pose a novel research question on the impact of interface design on equity in socio-technical systems. Through controlled experiments, we demonstrate how simple interface design interventions - such as modifying default rankings or displaying additional information about schools - might lead to changes in donation distributions helping platforms direct more funding towards schools in need. Going beyond online educational charities, we hope that our work will bring attention to the role of interface design nudges in the social requirements of online altruism.

America’s regressive wealth tax: state and local property taxes

ABSTRACT Most taxes in the United States are levied on income flows, not capital stocks. One notable exception is state and local property taxes. This note documents their magnitude and regressivity. Property taxes account for more than 30% of state and local tax revenue, and amount to an effective wealth tax rate of 0.86% on the assets of the median US homeowner. The effective property-wealth tax rates are highest for younger, lower-income homeowners.

Assessment Matters: The Rise and Fall of the Illinois Resource Equalizer Formula

This article explores the passage and failure of the 1973 Illinois Resource Equalizer formula which was designed to reduce disparities in school finance by breaking the connection between local wealth and school revenue. It argues that two sets of goals drove passage of the new law—equity and local property tax relief—and they came into conflict during implementation, with the latter winning out over the former. It argues that to understand both the passage and failure of the law requires looking deeply at the politics, policies, and practices of taxation, especially the methods of assessing property and levying taxes, where officials made decisions about how to apportion burden and benefits. The Illinois Resource Equalizer story highlights the political and policy choices that structure inequality through school finance at a moment when it was quietly defended and deepened.

Wasted in Waste? The Benefits of Switching from Taxes to Pay-as-you-throw fees: The Italian Case

Solid waste management is one of the most important functions performed by Italian municipalities and is mostly financed through local property taxes. Alternative financing schemes, known as ‘pay-as-you throw’ (PAYT), are designed to price each additional unit of waste and are becoming increasingly frequent at international level. Their advantages in terms of efficiency and equity, as well as of care for the environment, have been investigated both theoretically and empirically. This paper estimates the impact of PAYT schemes on the amount of waste produced and on the costs of its disposal for Italian municipalities. Results show that PAYT schemes deeply affect user behavior: total waste decreases (unsorted waste almost halves). Overall, the costs incurred by municipalities adopting PAYT fall by roughly 10 to 20 per cent in per capita terms, reflecting a reduction of one third in the cost of managing undifferentiated waste.