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The Hated Property Tax: Salience, Tax Rates, and Tax Revolts

  • Marika Cabral
  • Caroline Hoxby

Because of the obtrusive manner in which they are normally paid, property taxes are likely the most salient taxes in the U.S. However, they are much less salient to homeowners with tax escrow. Exploiting geographical variation in tax escrow, we test how salience affects property tax rates and limits. We instrument for tax escrow using bank holding companies' national mortgage servicing assets, focusing on companies that have local branches but do most of their business outside the area. We find that a one standard deviation increase in tax escrow produces about a one standard deviation decrease in property tax rates.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18514.

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Date of creation: Nov 2012
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Handle: RePEc:nbr:nberwo:18514
Note: ED PE POL
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  1. Looney, Adam & Kroft, Kory & Chetty, Raj, 2009. "Salience and Taxation: Theory and Evidence," Scholarly Articles 9748525, Harvard University Department of Economics.
  2. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2006. "Robust Inference with Multi-way Clustering," NBER Technical Working Papers 0327, National Bureau of Economic Research, Inc.
  3. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1984. "Equilibrium among local jurisdictions: toward an integrated treatment of voting and residential choice," Journal of Public Economics, Elsevier, vol. 24(3), pages 281-308, August.
  4. Mill, John Stuart, 1848. "Principles of Political Economy (I): Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 1, number mill1848-1.
  5. Mill, John Stuart, 1848. "Principles of Political Economy (III): Exchange," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 3, number mill1848-3.
  6. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-71, Nov./Dec..
  7. Emmanuel Saez, 2010. "Do Taxpayers Bunch at Kink Points?," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 180-212, August.
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