Property Tax Rates Research Articles

Summaries of Articles

Summaries of Articles

Tiebout Sorting, Zoning, and Property Tax Rates

This paper examines certain implications from the literature on Tiebout’s model of local government service provision, particularly Hamilton’s extension of the model to include local control of land use and property taxation. Our empirical analysis focused on the use of fiscal zoning to lower property tax rates, a topic that has not been addressed in the extensive literature on Tiebout’s model. Using data for over 100 municipalities in the Miami, Florida, metropolitan area, we specified property tax rates as a function of fiscal zoning measures, other municipal characteristics, and tax mimicking. We conclude that single-family zoning is by far the most important variable explaining municipal property tax rates.

The Assessment Gap: Racial Inequalities in Property Taxation

Abstract We document a nationwide “assessment gap” that leads local governments to place a disproportionate fiscal burden on racial and ethnic minorities. We show that holding taxing jurisdictions and property tax rates fixed, Black and Hispanic residents face a 10%–13% higher tax burden for the same bundle of public services. We decompose this disparity into between- and within-neighborhood components and find that just over half of it arises between neighborhoods. We then present evidence on mechanisms. Property assessments are less sensitive to neighborhood attributes than market prices are. This generates spatial variation in tax burden within jurisdiction and leads to overtaxation of communities with a high share of minority residents. We also find appeals behavior and appeals outcomes differ by race within neighborhood. Inequality does not arise from (i) racial differences in transaction prices or (ii) differences in features of the housing stock.

Collateral Value and Entrepreneurship: Evidence from a Property Tax Reform

We study the role of property taxes on entrepreneurial activity using a quasi-natural experiment, which unexpectedly reduced the upper bound of the Portuguese property tax rate for urban properties in 2008. Using a difference-in-differences approach, we find that treated municipalities (i.e., municipalities that had a property tax rate above the new upper bound) experienced higher entry rates in the manufacturing sector vis-a-vis control municipalities (i.e., municipalities that had a property tax rate at or below the new upper bound). Taking advantage of firm-level data, we show that start-ups created as a response to the decrease in property taxes in treated municipalities use more debt, invest more, and are more likely to survive.

Effects of Mortgage Interest Rate on Real Estate Investment in Kenya

As an investment and consumer good, real estate is significant. Like many developing countries, Kenya has struggled to give its citizens access to decent housing that is also affordable. More people are in need of housing due to urbanization, fast population growth, and rural-to-urban migration. Housing supply is less than demand as a result of several of macroeconomic and financial issues that affect real estate investment and, consequently, housing. This study looked into the impact of mortgage interest rates on real estate investment. The study, which covered the 11-year period from 2010 to 2020, used a causal research design and regression analytic research methods based on the Vector Error Correction Model. Data on real estate investments in Kenya The Kenya National Bureau of Statistics (KNBS) and Cytonn quarterly investments reports were obtained from the Central Bank of Kenya. The Ministry of Finance's database on national budgets (KNBS) provided information on mortgage interest rates, A pre-estimation test was run to verify the outcomes. The variables were stationary on the first difference. The VIF test result of 1.62 indicated that there was no multi-collinearity. The 1.9122 Durbin test value suggested that there was no serial correlation. Pairwise Correlation analysis showed a moderate correlation between mortgage interest rate on real estate investment (0.578). The report suggests that in order to incentivize real estate investment, the government should offer mortgage loans at reasonable rates, control property tax rates, and promote public-private partnerships in infrastructure development.

Analysis of Tax Compliance Determinants and Property Owners Socio-Economic Profile in Benin

Implementing efficient tax policy remains a central concern to leaders. Consequently, this article seeks to analyse the determinants of property tax compliance in Benin to ultimately establish the socio-economic profile of property owners. To achieve this, the article first regresses the partial proportional odds model to identify conditional and inf luential factors to taxpayers’ compliance. This is followed by an exploratory multiple component analysis to build a property tax compliance index to establish a socio-economic profile of property owners. The results from a representative sample of 4 575 individuals have shown that in the presence of factors that measure political and social inf luences, the probability that a taxpayer has good tax morale is estimated at 71,978 per cent. The property tax compliance index value sits at 3,076, confirming that Beninese property owners are mostly non-compliant. It was deduced from these results that the typical Beninese taxpayer is a “social taxpayer” strongly inf luenced by social norms. To improve the level of property tax compliance, the tax administrations of developing countries in general and that of Benin in particular, must implement a tax policy based on taxpayers’ profiles. Further studies on the determination of the optimal property tax rate are essential in order to quantitatively assess the extent to which mobilisation performance can be enhanced by taking taxpayers’ profiles into consideration.

An (in)effective tax and expenditure limit (TEL): Why county governments do not utilize their maximum allotted property tax rate

AbstractTax and expenditure limits (TELs) are restrictions placed on governments limiting their ability to collect and spend revenue. Residents support these TELs, as they desire lower tax burdens and more government efficiency; yet, residents still desire the same level of public services. Property tax rate limits, a specific type of TEL, are placed upon local governments to limit their ability to collect revenue and expand authority. Rate limits were implemented on the assumption that governments would tax at their highest maximum possible rate, but this is not always the case. This article studies why some local governments choose not to utilize their maximum allotted property tax rate. Using an open systems governance approach, a panel data analysis was conducted using data from 67 Florida counties from 2008 to 2017. Results of the analysis show that the use of special districts and the age of the residential population have significant effects on property tax rate decisions.

재산세 이론 관점에서 과세체계 현황 분석

Tax burden on land and houses has been increased and tax resistance to the policy aiming at increase of real estate holding tax is getting strong since revision of the taxation law in 2018. Under this circumstance, the study academically investigates theories of property tax, which is the base of real estate holding tax, and reviews whether or not the current taxation system is working in line of theories of property tax. According to theories of property tax, higher property tax should be imposed on land because of non-elasticity of land supply, elasticity of building supply and capitalization of public service. The study analyzes property tax imposed on both land and building of neighborhood facilities, based on the basic principles of property tax. The findings are as followed; First, the study calculates total expenditure spent on buildings and value of lands, using Standard Market Price for buildings and lands, respectively. According to the result, it is shown that total expenditure spent on a building is higher than value of a land in Provinces. On the other hand, Seoul and other metropolitan cities shows the opposite result. Second, property tax on land is lower than property tax on building in Provinces. The same results is shown in the analysis of effective property tax rate with revised panel data. In other words, the current property tax system imposes higher tax expenditure on building than land, which is not in line with the basic principle of property tax. Third, the current property tax rate should be reviewed and revised by revision of the current taxation law to improve the current circumstance and match with theories of property tax. The findings above may have some academic implications for theories of property tax and provide implications on policy preparation to revise property tax rate.

Summaries of Articles

Summaries of Articles

Differentiation of Fiscal Effects of Local Tax Policy in Countries Using Area-Based Property Taxation: the Case of Poland

The paper addresses differences in financial effects of local tax policy. Its aim was to examine the effects of decisions taken within the realm of tax authority in a country which applies area-based property taxation. The paper validates the hypothesis, according to which the impact of local tax policy upon tax revenues of local units depends on the social and economic potential of regions (in Poland called “voivodeships”). We believe that municipalities (called “gminas” in Polish) are more active in pursuing local tax policy (i.e., in reducing property tax rates) in regions whose social and economic position is weaker. Statistical and econometric analyses confirmed our theoretical assumptions and provided the evidence that the hypothesis is correct. By using econometric models, in this paper we also succeeded in identifying variables which help in explaining the real scale of reductions of property tax rates.

How Does a Reduction in Mandated Medicaid Spending Affect Local Fiscal Behaviors? Evidence from New York State

In 2005, New York (NY) state capped the growth of county-level Medicaid spending, which abruptly decreased counties’ Medicaid outlay in both relative and absolute terms. This study exploits this discontinuity in county Medicaid outlay to estimate the impact of the relief mandate policy on county budgets and property tax levies. It bridges a gap in the public finance literature by addressing local government responses to a sudden decrease in the outlay of a large mandatory spending category. We find a compositional change but no income effect on non-Medicaid spending. However, the policy reduced the effective property tax rate significantly by 6.6 to 8.1 percent on average among affected NY counties after the enactment of the policy relative to control counties. This study advances our understanding of local fiscal responses to an intergovernmental fiscal policy that changes how state and local governments share the costs of a large public social insurance program.

THE CONCEPT OF REAL ESTATE TAXATION BASED ON THE AD VALOREM PRINCIPLE

The purpose of this paper is to evaluate the pros and cons of ad valorem real estate taxation in the context of the reform of the Polish real estate taxation system. A property tax (or millage tax) is a levy on property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state, a county or geographical region, or a municipality. Multiple jurisdictions may tax the same property. This contrasts with a rent and mortgage tax, which is based on a percentage of the rent or mortgage value. There are four broad types of property: land, improvements to land (immovable man-made objects, such as buildings), personal property (movable man-made objects), and intangible proper-ty. Real property (also called real estate or realty) means the combination of land and im-provements. Under a property tax system, the government requires and/or performs an appraisal of the monetary value of each property, and tax is assessed in proportion to that value. Forms of property tax used vary among countries and jurisdictions. Real proper-ty is often taxed based on its classification. Classification is the grouping of properties based on similar use. Properties in different classes are taxed at different rates. Examples of different classes of property are residential, commercial, industrial, and vacant real proper-ty. In Israel, for example, property tax rates are double for vacant apartments versus occu-pied apartments.

Spatial diversification of property tax policy – Searching for yardstick competition in Polish metropolitan areas

This article contributes to the ongoing debate on local tax policy-making, in particular regarding yardstick competition in the area-based property taxation system. Based on data from 300 municipalities located in ten metropolitan areas in Poland over ten years, we identify whether we are faced with tax mimicking induced by political considerations in tax rates setting. In particular, we seek to identify whether the spatial interdependence of property tax rates set by local governments of Polish municipalities is driven by a yardstick competition mechanism.The analytical approach is based on the estimation of the spatial residential property tax reaction function by using spatial autoregressive panel models. In order to verify the presence of yardstick competition, we include a set of purely political variables in the models and test their impact on tax rate decisions.The results confirm the evidence of yardstick competition, which, however, is present only in a few of the examined metropolitan areas. We found nominal tax rates for residential buildings that were significantly lower in election years, and empirical evidence of several political factors influencing local tax policies in Poland.

Genesee County voters give OK to tax hike for mental health

With a majority totaling just under 55% of those who cast ballots, Genesee County, Michigan voters on May 4 approved a 10‐year increase in the county's property tax rate to finance improvements to the mental health system. The revenue generated from the approved increase will pay for initiatives in seven focus areas, with projects ranging from a new crisis center to stepped‐up police training in mental health crisis response to programs for youth (see MHW, May 3). According to a news release from Genesee Health System, the countywide public mental health agency that will manage the mental health infrastructure improvements, Genesee County becomes the sixth county in Michigan to provide property millage support for mental health services. “We will be organizing community‐based teams around the seven focus areas seeking input … on the needs and following best practices by those in the field,” said Genesee Health System CEO Dan Russell. Just over 43,000 of the county's 343,000 registered voters cast ballots in this month's special election, which county commissioners authorized after having hesitated to bring the proposal to voters in 2020.

Michigan county voters considering tax levy for mental health projects

Voters in Genesee County, Michigan, this week will decide whether the need for more effective mental health crisis response in the community warrants a 10‐year increase in the county's property tax rate.

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.

The Fiscal Effects of Tax Increment Financing on Rural School Districts: The Case of Iowa

Tax increment financing (TIF)—an economic (re)development tool originally designed for urban cities—has been available to rural communities for decades. This is the first study to focus solely on TIF in rural school districts, to examine TIF effects on school districts’ property tax base and rates, and to conduct event-study estimations of TIF effects. The study finds that TIF has mostly positive effects on rural school districts’ property tax base and mixed effects on property tax rates, and that TIF-induced increases in tax base come primarily from residential property and slightly from commercial property. The study’s findings assert the importance of returned excess increment if rural school districts in Iowa and many other states are to benefit from TIF.

ECONOMIC ESSENCE AND ROLE OF PROPERTY TAXES IN UKRAINE

Introduction. The development of local self-government is one of the important prerequisites for the formation of a democratic state. Effective activity of local self-government bodies is impossible without a sufficient amount of financial resources, which are formed at the expense of the local budget’s own tax revenues. The local taxes and fees are the basis of financial independence of local authorities in the most developed countries of the world, the main among which are considered property taxes. The formation and development of national tax systems takes longer in the most developed countries than in Ukraine, which in its turn, affects the quality of tax legislation and as a consequence is accompanied by a misunderstanding on the part of society’s tax innovations. The construction of the taxation system should be based on the citizens’ awareness of the fiscal importance of property taxes in the formation of the revenue side of the state and local budgets. The purpose of the article is to determine the features of the collection of property taxes in Ukraine, research their role in the formation of the revenue side of local budgets and to outline areas for improving property taxes in Ukraine using foreign experience. Results. The general features of the evolution of the property taxation system are considered. It is argued that a key element of the real estate taxation mechanism if the procedure for determining the tax base, which is mostly the valuation of the object. It is necessary to review property tax rates, conduct an inventory and ensure the full functioning of the system of mass registration of real estate, introduce a correction factor to take into account historical, territorial and other characteristics of real estate, increase tax literacy and tax culture of the population. Prospects. The attention will be paid to the differentiation of property tax rates, the feasibility of introducing preferential taxation, the advantages and disadvantages of property taxation and more in further research,.

Realization of the Benefits from the Functioning of Municipal Electric Transport in the Taxation of the Property of Individuals

The problem of introducing the benefit principle into local taxation for the implementation of investment projects for the development of municipal public transport is extremely relevant. Today, however, such projects are financed by the lump-sum method, which creates prerequisites for an even greater distortion of the benefit principle. Public transport being as an element of local public goods, there is a strict binding to the locality, which makes it difficult for taxpayers living outside such zones to use it. The purpose of the study is to substantiate the possibility of introducing the benefit principle into the taxation of property owned by private individuals in the case of the city of Yekaterinburg by establishing the dependence of the availability of tram stops on the capitalization of the cost of residential real estate. In this study, we intend to confirm the hypothesis about the possibility of using a differentiated property tax rate, which will allow us to introduce various tax instruments for a fairer and fiscally more efficient tax model that provides for additional taxation of residents who benefit the most from electric municipal transport. Calculations were carried out by comparing the homogeneity of the price reaction to the proximity of tram stops when zoning by type of real estate and without such zoning. The calculations have shown that the capitalization of the proximity of tram stops in the cost of housing in Yekaterinburg fits both into the static and dynamic equilibrium model. At the same time, the model with zones previously combined by type of real estate showed more uniform results in terms of the degree of influence of the proximity of tram stops on the cost of housing. As a result of the study, it was possible to identify geographically isolated zones in Yekaterinburg with the most smoothed effect of the interaction between the objects of the proximity of tram stops on the price of real estate. These zones are also ready-made fiscal zones with an increased property tax, the protected proceeds from which should become a source for the creation of new transport infrastructure of the zone. The hypothesis of the study is confirmed. This model of taxation provides a high level of fairness; at the same time it is practically applicable in the conditions of Yekaterinburg.