Property Tax Salience and Payment Delinquency
AbstractDespite only modest supporting evidence, shocks to households' personal finances are commonly cited as one of the principal causes of homeowner defaults. In this paper, I investigate the extent to which different component sources of annual variation in property tax obligations influence the probability and magnitude of property tax delinquency are likely precursor to mortgage default. Under Michigan's system of property tax limitations, rational homeowners should readily anticipate changes in tax liability, making such changes an unlikely cause of delinquency, regardless of the underlying source. Looking at tax payment records for the city of Ann Arbor, Michigan for the period 2006-2009, I instead find that a household's probability of making late payments, the tardiness of their payments, the amount by which they underpay, or the amount of their resulting interest penalties are all generally greater when changes in property taxes arise through less salient features of the Michigan tax system. This suggests that homeowners, especially new homebuyers, do not rationally anticipate their future tax bills and may instead bear a heavy cost for their inattention to the property tax system.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by LeBow College of Business, Drexel University in its series School of Economics Working Paper Series with number 2012-9.
Length: 31 pages
Date of creation: 01 Nov 2012
Date of revision:
property taxes; delinquency; default; tax salience; limited attention;
Find related papers by JEL classification:
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
This paper has been announced in the following NEP Reports:
- NEP-ACC-2013-07-28 (Accounting & Auditing)
- NEP-ALL-2013-07-28 (All new papers)
- NEP-PUB-2013-07-28 (Public Finance)
- NEP-URE-2013-07-28 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stefano DellaVigna, 2007.
"Psychology and Economics: Evidence from the Field,"
NBER Working Papers
13420, National Bureau of Economic Research, Inc.
- Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-72, June.
- S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
- S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 4.
- Raj Chetty & Adam Looney & Kory Kroft, 2009.
"Salience and Taxation: Theory and Evidence,"
American Economic Review,
American Economic Association, vol. 99(4), pages 1145-77, September.
- Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and taxation: theory and evidence," Finance and Economics Discussion Series 2009-11, Board of Governors of the Federal Reserve System (U.S.).
- Raj Chetty & Adam Looney & Kory Kroft, 2007. "Salience and Taxation: Theory and Evidence," NBER Working Papers 13330, National Bureau of Economic Research, Inc.
- Gamage, David & Shanske, Darien, 2011. "Three Essays On Tax Salience: Market Salience and Political Salience," Berkeley Olin Program in Law & Economics, Working Paper Series qt8gf0b1cj, Berkeley Olin Program in Law & Economics.
- O'Sullivan,Arthur & Sexton,Terri A. & Sheffrin,Steven M., 1995.
"Property Taxes and Tax Revolts,"
Cambridge University Press, number 9780521461597, December.
- Kenneth P. Brevoort & Cheryl R. Cooper, 2010. "Foreclosure's wake: the credit experiences of individuals following foreclosure," Finance and Economics Discussion Series 2010-59, Board of Governors of the Federal Reserve System (U.S.).
- Amy Finkelstein, 2009. "E-ZTAX: Tax Salience and Tax Rates," The Quarterly Journal of Economics, MIT Press, vol. 124(3), pages 969-1010, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard C. Barnett).
If references are entirely missing, you can add them using this form.