Working Paper: NBER ID: w18514
Authors: Marika Cabral; Caroline Hoxby
Abstract: Because of the obtrusive manner in which they are normally paid, property taxes are likely the most salient taxes in the U.S. However, they are much less salient to homeowners with tax escrow. Exploiting geographical variation in tax escrow, we test how salience affects property tax rates and limits. We instrument for tax escrow using bank holding companies' national mortgage servicing assets, focusing on companies that have local branches but do most of their business outside the area. We find that a one standard deviation increase in tax escrow produces about a one standard deviation decrease in property tax rates.
Keywords: property tax; tax salience; tax escrow; tax rates; tax revolts
JEL Codes: B12; H2; H24; H3; H71; P16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax escrow (H26) | Tax salience (H26) |
| Tax salience (H26) | Tax limits enacted (H29) |
| Tax escrow (H26) | Tax limits enacted (H29) |
| Tax escrow (H26) | Property tax rates (R51) |
| Tax salience (H26) | Property tax rates (R51) |