The Hated Property Tax: Salience, Tax Rates, and Tax Revolts
AbstractBecause of the manner in which it is normally paid, the property tax is almost certainly the most salient major tax in the U.S. The property tax is also the least popular tax and the only major tax whose revenues have declined as a share of income. We hypothesize that high salience explains the unpopularity of the property tax, the level of the property tax, and prevalence of property tax revolts. To identify variation in the salience of the property tax over local jurisdictions and over time, we exploit conditionally random variation in tax escrow. Tax escrow is a method of paying the property tax that makes it much less salient--as we demonstrate using survey evidence. We find that areas in which the property tax is less salient are areas in which property taxes are higher and property tax revolts are less likely to occur. We present several specification tests, including spatial correlation tests and instruments based on bank branches, that suggest that our results are valid. An implication of our results is that voters facing a non-benevolent government may wish to keep taxes' salience high even if, as a result, they hate their salient taxes.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18514.
Date of creation: Nov 2012
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Find related papers by JEL classification:
- B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-11-11 (Accounting & Auditing)
- NEP-ALL-2012-11-11 (All new papers)
- NEP-PBE-2012-11-11 (Public Economics)
- NEP-URE-2012-11-11 (Urban & Real Estate Economics)
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- Eric J. Brunner & Stephen L. Ross & Rebecca K. Simonsen, 2013. "Homeowners, Renters and the Political Economy of Property Taxation," Working papers 2013-30, University of Connecticut, Department of Economics.
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