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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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File URL: http://www.nber.org/papers/w18514.pdf
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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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  10. 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..
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