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Journal Article
Spirit of 13
Report
Fiscal deadlock in Minnesota
Report
Reading the fine print: how details matter in tax and expenditure limitations
At least 30 states, including Connecticut, Maine, Massachusetts, and Rhode Island, operate under ?tax and expenditure limitations? (TELs): formula-based budgeting requirements that apply specific limits to expenditures, appropriations, or revenue collections by state or local government. More than a dozen states considered TELs in 2006. Legislation proposing a new TEL to further limit General Fund appropriations in Rhode Island was introduced; Maine citizens will vote on a more restrictive TEL this November. ; Several factors, including a desire for lower taxes and a belief that additional ...
Working Paper
The connection between house price appreciation and property tax revenues
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 ...
Journal Article
Municipal finance in the face of falling property values
Working Paper
Property taxes and elderly mobility
The recent housing market boom in the U.S. has caused sharp increases in residential property taxes. Housing-rich but income-poor elderly homeowners often complain about rising tax burdens, and anecdotal evidence suggests that some move to reduce their tax burden. There has been little systematic analysis, however, of the link between property tax levels and the mobility rate of elderly homeowners. This paper investigates this link using household-level panel data from the Health and Retirement Study (HRS) and a newly collected dataset on state-provided property tax relief programs. These ...
Journal Article
Neighborhood school characteristics: what signals quality to homebuyers?
Popular wisdom and economic research suggest that the quality of the neighborhood school should be an important determinant of housing values. Many researchers have found that housing values are higher where school spending or student test scores are higher. However, few economists consider these characteristics good indicators of school quality. Meanwhile, no one has examined whether the economists' notion of school quality-the school's marginal effect on students-is a school characteristic that matters to homebuyers. ; Using a model of new home purchases and historical data on homes in the ...
Working Paper
The effect of state fiscal reform on population heterogeneity
This paper tests whether state fiscal policy alters neighborhood income homogeneity. One implication of the Tiebout model is that within-community homogeneity declines as a result of an exogenous decrease in the ability of jurisdictions to set local tax and expenditure levels. The Property tax revolt and the school finance equalization reform of the 1970s and 1980s offer a test of the role of state fiscal reform on aggregate population sorting behavior. The results show that fiscal reform, especially tax and expenditure limitation laws and property tax reform, results in a small but ...
Report
Housing busts and household mobility: an update
This paper provides updated estimates of the impact of three financial frictions?negative equity, mortgage lock-in, and property tax lock-in?on household mobility. We add the 2009 wave of the American Housing Survey (AHS) to our sample and also create an improved measure of permanent moves in response to Schulhofer-Wohl?s (2011) critique of our earlier work (2010). Our updated estimates corroborate our previous results: Negative equity reduces household mobility by 30 percent, and $1,000 of additional mortgage or property tax costs reduces household mobility by 10 to 16 percent. ...
Working Paper
Restraining the Leviathan: property tax limitations in Massachusetts
We examine the effects of Proposition 2-1/2--a property tax limitation law approved by Massachusetts voters in 1980--and assess voter satisfaction with these effects. We find that the proposition had a smaller effect on local revenues and spending than expected, as a result of both amendments to the law and a strong economy. Voters in 1980 believed there was significant waste in local government, partly because of an inability to monitor local officials. Proposition 2-1/2 curbed these agency losses, but direct local override votes and municipal expenditure patterns imply that the proposition ...