Federal deductibility and local property tax rates
In current discussions of tax reform in the United States, there is considerable controversy concerning the effects of allowing individuals to deduct state and local taxes when calculating their federal income tax liability. Recent econometric work has suggested that federal deductibility of state and local taxes has raised the proportion of these taxes -- especially property taxes -- in local budgets. This paper lends additional support to these earlier findings by showing that one channel through which deductibility leads to higher local property tax revenues is by increasing the rate of local property taxation. Specifically, we find that if deductibility were eliminated, the mean property tax rate in our sample of 82 communities would fall by 0.00715 ($7.15 per thousand dollars of assessed property), or 21.1 percent of the mean tax rate.
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- Douglas Holtz-Eakin & Harvey S. Rosen, 1987.
"Tax Deductibility and Municipal Budget Structure,"
NBER Working Papers
2224, National Bureau of Economic Research, Inc.
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"The Effect of Federal Tax Deductibility on State and Local Taxes and Spending,"
Journal of Political Economy,
University of Chicago Press, vol. 95(4), pages 710-36, August.
- Metcalf, Gilbert & Feldstein, Martin, 1987. "The Effect of Federal Tax Deductibility on State and Local Taxes and Spending," Scholarly Articles 2766699, Harvard University Department of Economics.
- Martin Feldstein & Gilbert Metcalf, 1986. "The Effect of Federal Tax Deductibility on State and Local Taxes and Spending," NBER Working Papers 1791, National Bureau of Economic Research, Inc.
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- Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-96, June.
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