Working Paper: NBER ID: w2197
Authors: Katharine L. Bradbury; Helen F. Ladd
Abstract: This paper investigates the simultaneous relationship between tax rates and city property tax bases using data for 86 large U.S. cities in 1967, 1972, 1977, and 1982. We find that a 10 percent increase in the city's property tax rate decreases the city's tax base by about 1.5 percent. In addition, local income taxes and taxes levied by overlying jurisdictions (such as county and state governments) also have negative impacts on the city's property tax base. Local sales taxes, in contrast, appear to have little impact. We conclude that taxes affect local property values more than is typically implied by previous studies that have investigated the impacts of state and local taxes on firms' location decisions.
Keywords: property tax; tax base; local government finance
JEL Codes: H71; H72
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher property tax rates (H29) | Decrease in property tax base (R51) |
| 10 percent increase in property tax rate (H71) | Decrease in property tax base by about 15 percent (H79) |
| Local income taxes (H71) | Negative impact on property tax base (R51) |
| Taxes levied by overlying jurisdictions (H29) | Negative impact on property tax base (R51) |
| Local sales taxes (H71) | Little effect on property tax base (H79) |
| Property tax rate (H71) | Per capita property values (P14) |