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The connection between house price appreciation and property tax revenues

  • Byron F. Lutz
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    This paper explores two aspects of the connection between property tax revenues and house prices. First, I estimate the elasticity of property tax revenues with respect to house prices. This elasticity does not necessarily equal one as governments may adjust effective tax rates to offset changes in property values. Second, I examine the timing of the relationship. Institutional features of the property tax make it unlikely that changes in house prices will immediately influence tax revenues. The results suggest that the elasticity eventually equals 0.4 and that it takes three years for house price changes to impact tax revenues.

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    File URL: http://www.federalreserve.gov/pubs/feds/2008/200848/200848abs.html
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    File URL: http://www.federalreserve.gov/pubs/feds/2008/200848/200848pap.pdf
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    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2008-48.

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    Date of creation: 2008
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    Handle: RePEc:fip:fedgfe:2008-48
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    1. Carroll, Christopher D. & Otsuka, Misuzu & Slacalek, Jirka, 2006. "How large is the housing wealth effect? A new approach," CFS Working Paper Series 2006/35, Center for Financial Studies (CFS).
    2. Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," Berkeley Program on Housing and Urban Policy, Working Paper Series qt28d3s92s, Berkeley Program on Housing and Urban Policy.
    3. Ladd, Helen F., 1991. "Property tax revaluation and tax levy growth revisited," Journal of Urban Economics, Elsevier, vol. 30(1), pages 83-99, July.
    4. Dye, Richard F. & McGuire, Therese J., 1997. "The effect of property tax limitation measures on local government fiscal behavior," Journal of Public Economics, Elsevier, vol. 66(3), pages 469-487, December.
    5. Dye, Richard F. & McMillen, Daniel P. & Merriman, David F., 2006. "Illinois' Response to Rising Residential Property Values: An Assessment Growth Cap in Cook County," National Tax Journal, National Tax Association, vol. 59(3), pages 707-16, September.
    6. Giertz, J. Fred, 2006. "The Property Tax Bound," National Tax Journal, National Tax Association, vol. 59(3), pages 695-705, September.
    7. Bloom, Howard S. & Ladd, Helen F., 1982. "Property tax revaluation and tax levy growth," Journal of Urban Economics, Elsevier, vol. 11(1), pages 73-84, January.
    8. Anderson, Nathan B., 2006. "Property Tax Limitations: An Interpretative Review," National Tax Journal, National Tax Association, vol. 59(3), pages 685-94, September.
    9. Preston, Anne E. & Ichniowski, Casey, 1991. "A National Perspective on the Nature and Effects of the Local Property Tax Revolt, 1976-1986," National Tax Journal, National Tax Association, vol. 44(2), pages 123-45, June.
    10. repec:cup:cbooks:9780521027922 is not listed on IDEAS
    11. Cornia, Gary C. & Walters, Lawrence C., 2006. "Full Disclosure: Controlling Property Tax Increases During Periods of Increasing Housing Values," National Tax Journal, National Tax Association, vol. 59(3), pages 735-49, September.
    12. Andreas Lehnert, 2004. "Housing, consumption, and credit constraints," Finance and Economics Discussion Series 2004-63, Board of Governors of the Federal Reserve System (U.S.).
    13. repec:cup:cbooks:9780521233293 is not listed on IDEAS
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