Local Tax Burdens Research Articles

State and Local Property Tax Burdens in 2005

Journal Article State and Local Property Tax Burdens in 2005 Get access David Baer David Baer Search for other works by this author on: Oxford Academic Google Scholar Public Policy & Aging Report, Volume 18, Issue 4, Fall 2008, Pages 26–32, https://doi.org/10.1093/ppar/18.4.26 Published: 01 September 2008

The impact of political parties on the distribution of state and local tax burdens

Using a disaggregated measure that allows us to examine the distribution of state and local tax burdens between high and low income groups better, this research finds that in many models, Democratic control is positively associated with a lower relative tax burden on the poor. The results are stronger for average Democratic strength in the state government than for unified Democratic strength. The results are strongest when comparing income groups just below the richest 1% (the next richest 2–5% and the next richest 6–20%) with the poorest 20%. Income inequality is strongly negatively associated with the degree of state and local tax progressivity.

An Analysis of Regional Economic Growth in the U.S. Midwest

In this paper, we examine more closely some of the forces that underlie economic growth at the county level. In an effort to describe a much more comprehensive regional economic growth model, we address a variety of different hypotheses by introducing a large number of growth-related variables. When formulating our hypotheses and specifying our growth model, we make liberal use of geographic mapping software to describe the data so as to “paint” a picture of where growth spots exist. Our empirical estimation indicates amenities, state and local tax burdens, population density, amount of primary agriculture activity, and demographics have important impacts on economic growth.

Do Agglomeration Economies Reduce the Sensitivity of Firm Location to Tax Differentials?

Low corporate taxes can help attract new firms. This is the main mechanism underpinning the standard 'race-to-the-bottom' view of tax competition. A recent theoretical literature has qualified this view by formalizing the argument that agglomeration forces can reduce firms' sensitivity to tax differentials across locations. We test this proposition using data on firm startups across Swiss municipalities. We find that, on average, high corporate income taxes do deter new firms, but that this relationship is significantly weaker in the most spatially concentrated sectors. Location choices of firms in sectors with an agglomeration intensity at the twentieth percentile of the sample distribution are estimated to be twice as responsive to a given difference in local corporate tax burdens as firms in sectors with an agglomeration intensity at the eightieth percentile. Hence, our analysis confirms the theoretical prediction: agglomeration economies can neutralize the impact of tax differentials on firms' location choices.

The Impact of Second Homes on Local Taxes*

AbstractA methodology to estimate the influence of second homes on municipal taxes is developed in this paper. Assuming that a larger floating population implies an increase in public expenditure, our aim is to develop a model of the relationship between the local taxes paid and the number of second dwellings in a village. As an applied example, the results for two of the most touristy regions of the Mediterranean – the Costa del Sol and the Costa Blanca, in Spain – are shown in this paper. As we will see, there are only three different levels of local taxes, regardless of the number of second homes. The main factors behind high local tax burdens are seaside location and the presence of foreign owners.

THE FAILURE OF THE POLL TAX AND CLASSICAL LIBERAL POLITICAL ECONOMY: LESSONS FOR THE FUTURE

The failure of the Poll Tax has been claimed to be an indictment of the principles of classical liberal political economy that it was intended to apply to local government finance. This article argues that, on the contrary, the failure of the Poll Tax was entirely predictable from the perspective of classical liberal political economy, and, in particular, public choice economics, because it involved a politically impossible reassignment of the local tax burden, presented local electors with an insurmountable collective action problem and ignored the ‘vote motive’ underlying the actions of national politicians held accountable for the new tax. Finally, the article proposes some lessons for the future of local government reform from the experience of the Poll Tax.

The short-term price effect of a tourist tax through a dynamic demand model: The case of the Balearic Islands

Tourist taxes have become an important source of revenue for many tourist destinations. Taxes on accommodation are upheld by their proponents as a way of shifting the local tax burden on to non-residents, while the travel industry claims that these levies do significant damage to their level of competitiveness. The objective of this paper is to identify the market's sensitivity to price changes in travel-related services or groups of services, assuming that one of the main factors that influences travel decisions is the information on the destination that consumers receive. In order to include this effect, the study applies a combination of a diffusion model and a traditional economic utility theory model to tourists visiting the Balearic Islands (Spain) from the United Kingdom, Germany, France and the Netherlands.

Net interstate population growth rates and the Tiebout-Tullock hypothesis: New empirical evidence, 1990–2000

This study empirically investigates the Tiebout-Tullock hypothesis as it might have applied to the pattern of net interstate population growth rates over the period 1990–2000. For the study period, it appears that the net state population growth rate has been an increasing function of the ratio of the total state plus local government outlays on public education in a state to that state's total state plus local government tax burden. Additional variables in the study, including the previous-period median single-family housing-price inflation rate, a measure of previous-period growth in real personal income per capita and certain quality-of-life variables, also prove to be significant determinants of the net population growth rate in a state. In this context, it appears that, for the study period, the Tiebout-Tullock hypothesis played a significant role in determining state net population growth rates.

Local Fiscal Strategies in the Netherlands: An Empirical Analysis

One of the most important possible sources of conflict of interest between central and local governments is difference in political preferences with respect to, for example, income redistribution. If local governments are of a different political composition than the central government, they may be inclined to reinforce or weaken the redistribution policies as pursued by the central government. We empirically test whether local governments in the Netherlands do pursue income redistribution policies over and above the central government's redistribution policy and we find that the distribution of the local tax burden over the various household types differs according to the political composition of the local council.

Migration and the Tiebout-Tullock Hypothesis Revisited

This empirical study investigates the Tiebout-Tullock hypothesis as it might have applied to net domestic state in-migration rates over the period 1990 through 1999. It appears that the net state in-migration rate has been directly related to the ratio of the total state plus local government outlays per capita on public education in a state to that state’s total state plus local government tax burden per capita. Other variables included in the study, including the previous-period median single-family housing price inflation rate, a measure of previous-period growth in real income per capita, and quality-of-life variables reflecting violent crime rates and sunnier climates, also seem to be significant determinants of the net state in-migration rate. Thus, for the study period, it appears that the Tie bout-Tullock hypothesis played a significant role in determining internal migration patterns.

The Right to Vote on Taxes

In recent years, several states have adopted so-called Right to Vote on initiatives - i.e., constitutional amendments requiring voter approval for any new or increased taxes imposed by local governments. In this Article, Professor Stark traces the history of these political developments and investigates the normative question of what role voter approval requirements should play within a fiscal constitution designed to limit the taxing powers of local governments. Advocates of a right to vote on taxes have premised their arguments on a libertarian concern for - taxpayers themselves should have ultimate authority over their fiscal destiny. Yet even if one accepts taxpayer consent as a legitimate principle of fiscal governance, it is not clear that voter approval requirements advance that rationale, given the existing structure of the local tax base. Through an examination of the median voter's tax price for a variety of common local levies, Stark highlights those features of the local tax base that result in a divergence between those who vote on taxes and those who pay them. Where this divergence is substantial, the libertarian case for tax voting is the weakest. In order for the rationale to have any traction, Stark argues that there must be a substantial correspondence between the population burdened by the tax and those who are empowered to vote does the libertarian. This analysis suggests a previously unexplored link between libertarian notions of taxpayer consent and an emerging literature in public finance economics concerning the optimal assignment of taxing authority to local governments. This literature has generally emphasized the efficiency gains from requiring local governments to rely primarily on taxes on their own residents, as opposed to source-based or other, more easily exportable taxes. Drawing on this literature, Stark argues for a new division of labor for the different types of tax limitation devices - if a state chooses to limit the taxing power of local governments, voter approval requirements should be used for residence-based taxes or the residential property tax, while alternative limitations may be more appropriate for those taxes with incidence effects that are less certain or more dispersed. Notably, California has adopted exactly the opposite approach, imposing direct limitations on the property tax and requiring voter approval for a variety of miscellaneous sales and business taxes. The Article then addresses the central normative question underlying the right to vote on taxes: even if the local tax structure could be reformulated in the manner suggested, should states adopt voter approval requirements for new or increased taxes? While recognizing the natural reluctance of liberal-minded scholars to endorse libertarian objectives, Stark suggests that there may nonetheless be value in pursuing a right to vote on taxes. To investigate this possibility, he develops a preliminary defense of tax voting that takes the idea beyond the libertarian rationale offered by its advocates. Drawing from recent political theory concerning deliberative and participatory democracy, Stark argues that involving voters directly in local tax decisions may help stimulate public debate regarding the allocation of local tax burdens. Again, however, the structure of the local tax base will likely play an important role in determining the extent to which these potential benefits will actually accrue. Taxes that local residents pay directly, such as the residential property tax or residence-based income taxes, may be more likely to stimulate popular participation and deliberation than those taxes whose economic effects are less certain or more dispersed. The Article concludes by suggesting that greater attention should be paid to the interplay between constitutional design and tax structure.

Partisan Influence on the Local Tax Burden in the Netherlands

This paper analyses the role of partisan politics in determining the local tax burden. Property taxes are the most important revenue source which municipalities in the Netherlands can decide upon themselves. Using a new data set on Dutch local property taxes in 1996, it is concluded that municipalities with a council dominated by left wing parties have a higher tax burden. We also find that larger coalitions have lower levels of taxation. Finally, tax exporting increases tax rates. The role of partisan politics in determining public policy is a contentious issue. Whereas some authors argue that partisan politics play little if any role, Hibbs (1987) and others pose that ideological differences are important in determining public policy. In this view left wing political parties are believed to be more in favour of an active state and income redistribution than right wing parties. In terms of taxation: it is expected that right wing government will be more favourable towards a lower tax burden than left wing govern- ments. Some authors argue that over the last two decades, say, the latitude for partisanship at the national level has been reduced tremendously. Due to financial and economic integration, partisan preferences may have become less important in shaping national tax and spending policies. This could per- haps also explain that there is only mixed empirical evidence in support of the partisan hypothesis (see Cusack, 1997 for further discussion). So far, only a few studies have examined the impact of partisan polit- ics at the non-national level. Abrams and Dougan (1986) conclude that US states with a liberal governor have a relatively higher level of state spending. Ibrahim (1994) analyses the relationship between spending of counties in the UK and the "political colour" of the county's government. He finds that La- bour governments spend more than Conservative ones, but this conclusion is suspect as the author does not include control variables. Borge (1995) reports higher fee income for local Norwegian governments under socialist reign.

Intervention analysis with cointegrated time series: the case of the Hawaii hotel room tax

Tourism taxes have become an important source of revenue for many tourist destinations in the USA. Among the most widely used is the hotel room tax, levied by 47 states and many localities. Room taxes are touted by proponents as a way to shift the local tax burden to non-residents, while the travel industry claims the levies signi® cantly harm their competitiveness. Previous studies of room tax impacts have relied on ex ante estimates of demand and supply elasticities. In this study, we analyse the eA ect onhotel revenuesof the Hawaiiroom tax using timeseries interventionanalysis. We specify a time series model of revenue behaviour that captures the long-run cointegrating relationships among revenues and important income and relative price

Impacts of government policies, economic conditions, and past migration on net migration in the USA: 1992–93

The determinants of net migration rates including government taxes and welfare spending for 48 contiguous states and the District of Columbia during 1992–93 are examined. The weighted least squares (WLS) method is employed assuming dependent variable heteroscedasticity. Major findings indicate that net migration rates vary positively with employment growth, hourly earnings, percentage of possible sunshine, and past net migration, and they are negatively correlated with state and local tax burdens, welfare spending, violent crime, and percentage of population in the age groups of 18–24 and 24–34. Thus, Sir John Hicks's theory that migration was mainly caused by net economic advantages is confirmed. These results may have policy implications in the area of job creation, tax policy, welfare reform, the allocation of limited budget to different programmes and law enforcement.

The Rates Revisited? A Geographical Reassignment of Property Valuations and Local Tax Burdens under the Council Tax

In this paper the detailed patterns of British property valuation and local revenue raising under the council tax are compared with those prevailing under the domestic rates. The results of matching individual council-tax valuations with rateable values for the 47000 domestic properties that make up the Inner Area of Cardiff, Wales, are reported. A geographical information system is used to identify the disaggregate pattern of properties which have been assigned higher or lower relative values after the abolition of the domestic rates. The findings are seen as significant in describing the intraurban geography of property values in Britain: properties constructed by local authorities now attract significantly lower relative valuations; pre-1919 private-sector housing is now more highly valued; and different construction types (for example, purpose-built flats, converted flats, and ends of terraces) attract quite different valuations under the two regimes. Overall, the distribution of rateable values vis-à-vis that of council-tax bands is likely to have had a multifaceted effect upon local revenue raising, and the authors begin to explore its changed geography in some detail.

Fiscal impacts of local population growth: A conceptual and empirical analysis

This paper examines the legitimacy of concerns of local residents about the adverse fiscal impacts of population growth. The conceptual discussion shows that economic theory provides no clear prediction of the impact of population growth on per capita spending. Based on a national data set of large countries, simple d descriptive analysis indicates that greater population growth is associated with higher per capita current spending and interest outlays. More detailed analysis both of 1978–1985 changes and of 1985 levels of current spending indicates that higher growth-related per capita spending primarily reflects the combined effects of greater density and increased local spending shares. In sum, established residents in fast- growing areas may experience declines in service quality as well as rising local tax burdens.

Mimicking of Local Tax Burdens Among Neighboring Counties

This article contributes to the small literature on the determination of local taxes by testing hypotheses about whether local officials consider the tax burdens of neigh boring counties when making their own decisions about taxes on residents. Based on data for large U.S. counties, evidence of tax mimicking appears first in compar isons of the degree of clustering of tax burdens among neighboring counties within metropolitan areas to that among nonneighboring counties within states. In addition, regression equations based on both 1978 and 1985 data confirm the presence of tax mimicking for total local tax burdens and for property tax burdens, but not for sales tax burdens.

Price specification and the demand for public goods

Nearly all public expenditure demand studies define the marginal price for publicly provided goods as the household's share of the local property tax burden, or what is often called the tax- price. Such a definition is at odds with two familiar facts: taxes are ordinarily distortionary, and property values are often influenced by the value of local services. This paper constructs a theoretically consistent marginal tax-price measure incorporating these considerations. The new measure demonstrates that previous estimates of the price and income elasticities of demand for public services are biased, except under very restrictive circumstances. Moreover, the direction of this bias will depend upon the actual incidence of public spending and the tenure status of residents.

The Switch from Domestic Rates to the Community Charge in Scotland

As the first step in the general reform of local government finance in Great Britain, domestic rates in Scotland were replaced by the community charge or poll tax with effect from 1st April, 1989. At the same time Scottish households faced a rise in their local tax bills from an average of £399 p.a. in 1988/89 under the former rating system to an average of £467 p.a. in 1989/90 under the new financial arrangements. In this article I will examine the reasons for this large increase in local taxes and how the switch from domestic rates to the community charge has affected the distribution of the local tax burden across households. The empirical analysis is based upon detailed calculations of local tax liabilities for 636 Scottish households covered by the Family Expenditure Survey in 1985. All nominal values have been adjusted to mid-1988 or mid-1989 prices as appropriate using actual and forecast indices of prices and incomes.

LOCAL TAX BURDENS AND THE SUPPLY OF BUSINESS SITES IN SUBURBAN MUNICIPALITIES*

ABSTRACT. The purpose of this study is to examine the effects of local household tax burdens and other community attributes on the supply of business sites made available by local municipalities. A model of community site supply is tested in which municipalities trade off increased fiscal benefits from business location and reductions in environmental quality that accompany industrial and commercial development. This tradeoff is embodied in municipal zoning decisions. Empirical analysis of industrial and commercial zoning in two rapidly growing suburban counties of the Philadelphia metropolitan area provides considerable support for the tenets of community site supply theory.