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Regional analysis of property taxation, education finance reform, and property value growth

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  • Skidmore, Mark
  • Reese, Laura
  • Kang, Sung Hoon

Abstract

In this article we examine the relationship between property tax rates and tax base growth in southeast Michigan using data for all 152 communities in the five counties surrounding Detroit over the 1983–2002 period. To address endogeneity, we exploit the adoption of Proposal A in 1994, which resulted in substantial exogenous and differential changes to property tax rates and school spending across all communities. This major state imposed intervention enables us to examine the tax rate–tax base relationship using appropriate instrumental variable techniques. We find that both tax rate and school spending changes have statistically significant effects on tax base growth. We also examine the effects of competitor community policies on own community tax base growth using a unique approach to define competitors. Specifically, competitor communities are determined by migration flows as opposed to the more traditional methods based on contiguity or population. We find significant regional competition effects; changes in tax rates and school spending relative to competitors are also important to tax base growth.

Suggested Citation

  • Skidmore, Mark & Reese, Laura & Kang, Sung Hoon, 2012. "Regional analysis of property taxation, education finance reform, and property value growth," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 351-363.
  • Handle: RePEc:eee:regeco:v:42:y:2012:i:1:p:351-363
    DOI: 10.1016/j.regsciurbeco.2011.10.008
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    References listed on IDEAS

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    Cited by:

    1. Sung Hoon Kang & Mark Skidmore & Laura Reese, 2015. "The Effects of Changes in Property Tax Rates and School Spending on Residential and Business Property Value Growth," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 300-333, June.
    2. Hodge, Timothy R. & Komarek, Timothy M., 2016. "Capitalizing on Neighborhood Enterprise Zones: Are Detroit residents paying for the NEZ Homestead exemption?," Regional Science and Urban Economics, Elsevier, vol. 61(C), pages 18-25.
    3. repec:ntj:journl:v:70:y:2017:i:2:p:367-392 is not listed on IDEAS

    More about this item

    Keywords

    Property tax; Education finance; Tax base growth; Regional tax competition;

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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