Property Tax Salience and Payment Delinquency
Despite only modest supporting evidence, shocks to households' personal finances are commonly cited as one of the principal causes of homeowner defaults. In this paper, I investigate the extent to which different component sources of annual variation in property tax obligations influence the probability and magnitude of property tax delinquency are likely precursor to mortgage default. Under Michigan's system of property tax limitations, rational homeowners should readily anticipate changes in tax liability, making such changes an unlikely cause of delinquency, regardless of the underlying source. Looking at tax payment records for the city of Ann Arbor, Michigan for the period 2006-2009, I instead find that a household's probability of making late payments, the tardiness of their payments, the amount by which they underpay, or the amount of their resulting interest penalties are all generally greater when changes in property taxes arise through less salient features of the Michigan tax system. This suggests that homeowners, especially new homebuyers, do not rationally anticipate their future tax bills and may instead bear a heavy cost for their inattention to the property tax system.
|Date of creation:||01 Nov 2012|
|Contact details of provider:|| Web page: http://www.lebow.drexel.edu/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gamage, David & Shanske, Darien, 2011. "Three Essays On Tax Salience: Market Salience and Political Salience," Berkeley Olin Program in Law & Economics, Working Paper Series qt8gf0b1cj, Berkeley Olin Program in Law & Economics.
- William Congdon & Jeffrey R. Kling & Sendhil Mullainathan, 2009.
"Behavioral Economics and Tax Policy,"
NBER Working Papers
15328, National Bureau of Economic Research, Inc.
- Looney, Adam & Kroft, Kory & Chetty, Raj, 2009.
"Salience and Taxation: Theory and Evidence,"
9748525, Harvard University Department of Economics.
- Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and taxation: theory and evidence," Finance and Economics Discussion Series 2009-11, Board of Governors of the Federal Reserve System (U.S.).
- Raj Chetty & Adam Looney & Kory Kroft, 2007. "Salience and Taxation: Theory and Evidence," NBER Working Papers 13330, National Bureau of Economic Research, Inc.
- Stefano DellaVigna, 2009.
"Psychology and Economics: Evidence from the Field,"
Journal of Economic Literature,
American Economic Association, vol. 47(2), pages 315-372, June.
- Kenneth P. Brevoort & Cheryl R. Cooper, 2010.
"Foreclosure's wake: the credit experiences of individuals following foreclosure,"
Finance and Economics Discussion Series
2010-59, Board of Governors of the Federal Reserve System (U.S.).
- Kenneth P. Brevoort & Cheryl R. Cooper, 2013. "Foreclosure's Wake: The Credit Experiences of Individuals Following Foreclosure," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 41(4), pages 747-792, December.
- O'Sullivan,Arthur & Sexton,Terri A. & Sheffrin,Steven M., 2007.
"Property Taxes and Tax Revolts,"
Cambridge University Press, number 9780521035996, December.
- Marika Cabral & Caroline Hoxby, 2012. "The Hated Property Tax: Salience, Tax Rates, and Tax Revolts," NBER Working Papers 18514, National Bureau of Economic Research, Inc.
- Amy Finkelstein, 2009. "E-ztax: Tax Salience and Tax Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 124(3), pages 969-1010.
When requesting a correction, please mention this item's handle: RePEc:ris:drxlwp:2012_009. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard C. Barnett)
If references are entirely missing, you can add them using this form.